What Your Private Equity Firm Can Gain From a Virtual Data Room

Nicholas J Price
6 min read
As other forms of investing have shown volatility or losses, private equity firms are enjoying enough success and prosperity that they're growing in number and popularity. High-net-worth individuals and institutions are looking more toward private equity firms to make mutually beneficial deals. Managers of private equity firms know the importance of timing and being well-prepared when a lucrative deal comes their way. They also know how important it can be to close the deal fast.

Virtual data rooms provide an online workspace that efficiently takes a sale from the source of the transaction to the closing using a highly secure, accessible platform.

Virtual Data Rooms for Sourcing Deals

Private equity firms use their networking capabilities to get referrals for possible deals. They also use marketing strategies to seek out deals on their own.

When a viable prospect comes their way, private equity firms need to move quickly to get information from the potential client, such as detailed organizational and financial documents.

Historically, private equity firms have set up or rented physical space to be used as a deal room. However, today's firms are finding that virtual deal rooms provide all of the same benefits of a physical room while having the added benefits of being cost-effective, timely, efficient and more easily controlled.

Virtual data rooms give private equity firms complete control. The platform allows them to upload any documentation provided by either side and to create user-based permissions to access the various folders and subfolders based on their role in the transaction.

Virtual Data Rooms for Companies and Ventures Seeking Capital From Private Equity Firms

Companies and ventures that are searching for a deal with a private equity firm often set up their own deal rooms. A deal room gives them the ability to house important documents that detail their business model and plan, financial statements, and biographies of the board and senior leadership.

Virtual data rooms work well for companies and ventures looking for capital for all the same reasons they work for private equity rooms ' cost, efficiency and timeliness. A virtual data room stands ready to invite prospective investors in to view their documents as they deem appropriate.

Virtual Data Rooms Offer the Most Secure Platform for Managing and Closing Transactions

Virtual data rooms offer the perfect online space to match capital seekers with private equity firms and to house the transaction securely from the due diligence process to the closing of the transaction. Virtual data rooms provide the necessary electronic storage for intellectual property, asset portfolios, client lists and all the other necessary documents for review.

A virtual data room provides an online meeting space where both parties can access information in a secure setting at their convenience. The ability to access the room 24/7 makes for an easy flow of information, which facilitates faster closings with less complication.

Virtual Data Rooms Offer Protection When Deals Fall Through

While both parties proceed with making a deal as if the closing is certain, the complexity of such deals creates caution and uncertainty until all parties are present at the closing and the final documents are signed.

The reality is that not all deals make it to the final closing process. Administrators of virtual deal rooms have the capability to change user permissions in a few clicks to protect sensitive data if a deal falls through. Administrators can also revoke access to the deal room completely to protect uploaded data. Virtual data rooms have built-in security features such as watermarking, disabled printing, audit trails and other security features that administrators can put in place to protect data as needed.

Virtual Data Rooms Provide Secure Online Space for Monitoring Investments

The deal ends when the closing is over, but the relationship between capital seekers and private equity firms is just beginning. Both parties want the deal to be successful over the long term.

Private equity firms may need to become actively involved in their new partners' management processes to be sure they succeed using their new funds and the relationship continues to be mutually beneficial.

Both sides may choose to continue using the virtual data room, so they can monitor investments and continue to collaborate and strengthen the relationship.

How to Be Sure Your Virtual Data Room Is Secure

Providers of virtual data rooms claiming to host secure online spaces should be prepared to share data that demonstrates how secure their virtual data rooms are. For example, Diligent's board management software, which is a more secure version of a virtual data room is protected with ISO/IEC 27001 and 27002 certifications, which are generally considered the highest levels of information security that a provider can have. These certifications offer the promise that security was tested and proven secure by an independent party with expertise in cybersecurity.

Be wary of virtual data rooms that integrate with public email accounts such as Gmail, Yahoo, Microsoft Office or other public platforms. A virtual data room may offer the security that your private equity firm needs, but it may integrate with other platforms that lack the proper security for the complexity and sensitivity that private equity deals require.

Give Your Private Equity Deals the Proper Scope

Physical deal rooms and small online data rooms offer a safe, temporary space to conduct your transactions, but they don't always take firms to the next steps of monitoring their partners' businesses. Doesn't it make good business sense to look for a virtual data room provider that offers additional options to support your business needs long past the closing?

Diligent Corporation's software developers thought about the needs of private equity firms beyond deals and closings. Diligent Boards is a cornerstone tool that supports the features of virtual data rooms and offers additional software solutions that create more secure communications and good governance. Documents that private equity firms commonly find in a virtual data room ' such as board meeting minutes, officers and directors, and committees ' are already best suited for a board portal. Diligent didn't stop there. Diligent is the only provider of a comprehensive governance management solution, offering a suite of software products composing the Governance Cloud. The Governance Cloud includes such products as: These products provide private equity firms with a total Enterprise Governance Management system.

The growth and popularity of private equity firms are on the rise. The best approach to private equity deals in today's marketplace is to implement a total solution like those offered in Diligent's Enterprise Governance Management ecosystem that can cover the full scope of your private equity firm's needs, now and for the future.