Typically used by lawyers when conducting due diligence, VDR’s ensure that highly sensitive documents are kept secure when making the following transactions:
· Corporate- M&A
· Property- Sales and leases, restructuring asset backed loans and mortgages
· Corporate Finance-Private placement and debt financing
· Intellectual Property- Exchange/ share documents on joint ventures, licensing agreements, fundraising, financing
· Litigation-Restructuring and insolvency transactions outlining structures buy and sell assets, close financing and raising additional capital.
In recent years, the data room process has increasingly been taken in-house by law firms for the perceived purpose of reducing cost. But with the volume of M&A transactions gaining momentum in the market, Drooms outlines three key advantages for law firms in partnering with an external VDR:
Improved operational efficiency
Increasingly fixed client budgets are placing even greater pressure on the legal sectors cost base, meaning that the time spent on due diligence is crucial. The high speed nature of external VDR’s and the tools that they offer are fundamentally important in reducing expenditure and driving operational efficiency for law firms . World wide data access 24/7 and centralized document provision ensure compliant distribution of confidential documents during the due diligence process.
The corporate and financial sector is absorbing a great deal of new legislation at present, with increased regulatory involvement in M&A transactions from a cross border perspective. VDR’s can help supply law firms with the tools to comply effectively with regulatory change, outlining the number of documents required from a specific set of data points to streamline the process of meeting regulatory requirements. One recent example of this is the incoming European Union legislation Alternative Investment Fund Managers Directive (AIFMD) which requires lawyers, fund and real estate managers to handle up to 2,000 documents from 200 data points throughout the lifecycle of a fund. VDR’s such as Drooms are crucial in driving greater focus on due diligence in meeting regulatory compliance.
Industry leading technology
The efficiency of a data room in streamlining transactional processes is wholly reliant on high quality technology. Whilst, law firms have knowledge, project management and human resources at their disposal, VDR’s rely on an industry leading IT function requiring constant maintenance, technical support available 24/7, regular platform backups, daily verification and file histories. Taking into consideration, the nature of global transactions, an in-house IT team would struggle to compete.
An example of unique VDR technology includes the indexing and OCR tools that allow parties to use text recognition inside documents to read the right documents and the right parts of documents more carefully and thoroughly, to optimise the risk/efficiency trade off.
Increased data protection
A security breach to client documentation is one of the biggest threats to a law firm and the cost of getting it wrong is of paramount importance. In a period of increased data protection threats and hacking allegations, security cannot be compromised. EU data protection laws mean that personal data from EU countries may not be transferred to non-compliant countries such as the US. The “Safe Harbour” principles in theory protect European data but are currently being called into question by European authorities as an adequate solution to this legal dilemma.
Under the Foreign Intelligence Surveillance Act, all documents uploaded onto cloud based systems within the jurisdiction of the US can currently be accessed and analysed without a warrant by American security agencies. Therefore, without rigorous control of data in a fully European data room, the risk of data appearing on US servers is particularly prevalent and poses data security issues.
VDR’s have a highly important role in supporting governance, compliance and risk management. Most frequently applied through Software as a service (SaaS) instead of cloud based solutions, documents are protected through server locations that are compliant with EU data protection laws. In addition, project managers are assigned to each transaction to ensure ultimate security and protection.
The nature of complex transactions handled by law firms mean that vast amounts of highly sensitive information can change hands from 5-20 parties in medium to large cases and up to 100 parties in very large cases. External VDR’s use highly sophisticated tracking services to control and determine access rights to highly confidential information to a range of competitors throughout the transaction lifecycle. Through a “view only” basis, information cannot be used later by unsuccessful bidders and there are no means of copying information
Howard Revens, UK Managing Director at Drooms said “The benefits to a law firm of using an external VDR are clear, particularly in light of the Safe Harbour review. Speed and cost during transactional processes are vitally important to time limited lawyers when conducting due diligence processes. They need to rely on best-in-class, high speed technology which ensures absolute data security and allows them to work as efficiently as possible. At Drooms, we are regarded in Europe as the VDR for the legal sector and work tirelessly to ensure our products meet the needs of lawyers.”
Drooms, provided by Data Rooms Services Group, is Europe’s first specialist data room provider, founded in 2001 and privately owned and funded. Drooms is a global company headquartered in Switzerland with offices across Europe, Asia and South America. Drooms has over 100,000 unique users and has supported over three thousand transactions with an aggregate value of over €200 billion. Please visit www.drooms.com