Data Rooms and Private Equity Deals

Erik Mills

3 min read

#iDeals News Update: May 06, 2021

Companies that want to grow are interested in different developmental plans. They could employ more people, or increase the number of services they render, but one of the most straightforward ways is to find someone who will invest in the company. This sort of investment is called private equity. 

As with any deal, appropriate documentation is very important. It helps with providing transparency to the potential investor and simplifies the actions both sides need to undertake. This is where data rooms can prove useful. 

Due to worldwide circumstances, many of those physical data rooms were transformed into virtual data rooms. There are a couple of benefits that make this shift a positive event.

But before we start defining those benefits, we need to understand what private equity deals are, and how those data rooms tie into those transactions.

What are private equity deals?

Private equity deals are all the deals that include any company that isn’t listed on any exchanges. This means that any operations that it undertakes do not have to be public, and they might share the necessary details only to the interested parties. This way, private equity companies have bargaining power, with the possibility of one day going public, and further increasing their value. They can also benefit from using a private equity data room.

What is a private equity data room?

Like in each important business transaction, the world of private equity deals is full of paperwork. Statements about the cash flow of the company, the list of employees, and current patents are all documents that are incredibly important for the operational capacities of the company in the deal. A private equity data room involves both sides of the deal to show important documentation to make the deal as transparent as possible. A data room private equity company use case might be visible in the increase of revenue a tool like this entails.

How data rooms can increase revenue during private equity deals?

There are a couple of ways a private equity data room can increase revenue apart from the many other benefits such a software solution entails.

• Finding deals worth taking — combining all of the intelligence found on the internet about a company, or companies worth working with is crucial to the later development of private equity based on deal sourcing private equity that might be interested in combined growth. A data room private equity used for research should return its value in the future of the company. 
• Overseeing, and providing transparency — through the use of a virtual data room, the private equity company can update the investors with real-time data about their operations, and how the money is used, including private equity platforms.
• Deal control — if there are deals to be made with a private equity company, or the private equity company wants to make deals of their own, there is great control in using a tool like virtual data room private equity utilizes. You can control all the moving pieces all from inside of this software solution.

Benefits of data rooms for private equity

Data safety

Even though documents can be stored in a secure physical facility, you still need to access that facility in person. The same safety, or even better, can be provided by data room companies like Ideals, Intralinks or Dealroom. If someone is interested in investing in the company, safe access to data from anywhere in the world is a huge benefit. 

Transparency 

By inputting the necessary documents and outlining the structure of the company as reflected in the folder organization, the investor is able to assess every data point. Nothing is hidden behind bookshelves, and misplacing a paper is impossible. The secure search options provide the data room users with tools that would be impossible to implement in physical data rooms. 

Cooperation 

With the introduction of remote access, cooperative effort between your company and any investor is a lot easier. With special permission settings in place and the ability to control a variety of teams from the comfort of one’s home, it is possible to improve the workflow of document presentation for private equity deal sourcing. You can monitor when someone works on some data, and what changes they have made on the document. This would be hard to accomplish with a physical data room. 

Control over the whole process

Virtual data rooms enable both sides of the private equity deal complete control over the transaction. Both the company and the investor have access to a variety of tools helping them make informed decisions on whether the proposed course of action is profitable or not.

In most cases, thanks to the benefits of virtual data room use, deals are concluded with a net profit for both sides.

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Deal sourcing for private equity is important for the growth of the company. We want to ensure that everything is as transparent as possible, and through data rooms we are able to do just that. The documents placed in data rooms are secure, with cooperation almost effortless, and the conclusion of the deal almost guaranteed.