By Abby Roberts, Senior Director, Product Marketing
When you’re moving at lightning speed, shaking up your deal process is the last thing you want to do. That’s why when we first started to see buyers purchase the data room in 2018, we took note. Until then, data room selection in M&A processes was almost exclusively left in the sellers’ hands.
What first appeared to be a blip in our data steadily increased quarter-over-quarter as word of mouth spread. ‘We discovered that buyers preferred to standardize and to select the data room when they could,' says Colin Schopbach, VP Sales, who first noted this trend in 2018.
In fact, based on a 2020 global corporate survey of 600+ corporate dealmakers, 50% of all buyers said they choose the VDR in one-on-one deals, either telling the seller which data room to purchase or purchasing it themselves. For larger, 1bn+ revenue companies that preference crept even higher, to 54%.
So what’s going on behind the numbers? Why are buyers upending long-standing practice? There are four major reasons.
One of buyers' biggest pet peeves is sifting through sellers’ data rooms trying to find and match items to their review checklist. Like a disorderly house, sorting through disorganized materials slows down deals and adds hours of painstaking work.
Expert buyers have discovered an easy workaround to this problem for one-on-one deals. Instead of plowing through a sell-side data room, they ask the seller to upload documents directly in the buy-side VDR index. This simple workflow hack enables sellers to give buyers exactly what they want – and skip lots of aggravation on both sides.
Another big reason for the switch? Data room analytics. With buy-side review teams easily stretching to 50 or more people per acquisition, the need for workstream oversight is acute. In fact, in a recent corporate development survey we conducted, 79% of buyers said they struggled with the task, with 52% of them calling it very or extremely difficult.
Even before the advent of dedicated buy-side VDRs, buyers discovered that controlling the VDR helped solve for this challenge. Metrics like progress by folder, user logins, or even permission checks provided a way to get a stronger handle on deal team progress.
With buy-side VDRs now in the market, acquirers have more visibility into their process than ever before. Dashboards with real-time metrics on workstream updates, for instance, automate what was before a painful, manual data collection and reporting out process.
In addition to speeding up workflow, buyer-specific analytics help surface potential issues earlier in the process.
"The Dashboard allowed multiple clients to act on an issue earlier in the process. In one example, they were able to save time and money on due diligence and walk away sooner. In another example, they worked through a major insurance issue that they said, using their old process, would have been too late to save the deal," says Kristen Cocco, Senior Director for Datasite Acquire, Datasite’s dedicated buy-side platform.
Buyers also switch for a very pragmatic reason: platform standardization and quality assurance. Asking extended deal teams to work on a different technology platform for every review, and providing them with limited training and customer support, increases friction points.
In addition, buyers want to ensure the platform meets certain security and functionality standards. For instance, one common concern is whether reviewer permissions are adequate and set up correctly – a critically important and often challenging task.
For buyers, first-class support matters. Buyside review teams can easily span 50 or more people across multiple internal departments – many of whom may have limited to no experience working in data rooms. For these individuals, getting up to speed can be downright overwhelming.
When a question inevitably arises, poor quality or timeliness of support can quickly derail the set timeline of a deal. Buyers want to choose a data room offering where service is as equally important as the underlying technology’s functionality.
But service encompasses more than just live help with a service team. Buyers care about choosing platforms that have robust self-training resources. These are another tool to help team members efficiently do their work within the data room, and more quickly cross the finish line.
Now that you know why buyers are choosing the data room, it’s your turn. Click below to speak to your client representative or request a personalized demo to learn more about how Datasite can help you take control of your buy side process as this trend becomes the norm.