Why Should Banking Be Moving Towards Virtual Data Rooms?Author: Lauren Hawells
The world is becoming more accustomed to using cloud computing tools as we use them more and more in our everyday lives. From storage features on our smartphones or laptops to advanced online data repositories, the uses of cloud computing seem to be endless. Virtual data rooms (VDRs), a form of secure cloud data storage and sharing, are revolutionizing the way companies are seeing the online space as a tool. For years there was a lack of trust in the security of online services, but the providers of virtual data rooms have sought to change that thinking. From saving resources to maximizing possible transaction value, here are some reasons why bankers should be using virtual data rooms.
The birth of the Internet nearly thirty years ago led to new and grand opportunities in information sharing. The world market has slowly started making the shift over to digital storage since then in an attempt to remove the need for paper and physical storage. If the whole world is doing it, there is no reason for bankers to resist evolving with the technology now that they have methods for securely storing and sharing their data. In particular, using virtual data rooms as a data storage and sharing method (instead of their outdated physical counterpart) gives banks a reason to make the change. If they do adopt this cloud technology, they could save a lot of money in not having to pay for storage space or printing. Furthermore, they won’t face administration issues such as having to bring clients in to the data rooms physically. Both corporate and retail bankers can benefit from this money and space saver; while customers of retail banks will also appreciate not having to come into the bank for every little transaction that they need to take place, thus increasing the bank’s value in the customer’s eyes.
There are a number of sectors within the banking industry that might benefit from using a virtual data room over a physical data room. In particular, investment bankers working in M&A would benefit the most. Before VDRs, the due diligence process could take up huge amounts of time and resources. Now, however, due diligence can be effortlessly streamlined by using a VDR. As mentioned before, not having to physically bring bidders or investors in to view the data in the data room will mean fewer costs and faster decision making in the due diligence process. Due to the faster and more secure data transferal process, virtual data rooms minimize the time needed for possible bidders to check the data provided by the sell-side party. A once laborious and mundane task can now be completed in a fraction of the time and at a fraction of the cost.
Maximize transaction value
Any method of maximizing profit from a transaction is beneficial to any retail banker or investment banker. Because you do not have to worry about being physically present within the virtual data room, there exists no queue or waiting period to access the data. This means that you can invite multiple bidders or investors to enter the data room at any given point and from any given location. As such, obstacles that rose from inviting parties from foreign countries are no longer an issue. This is different from physical data rooms in that you won’t incur the same travel costs from bringing them to your offices. In other words, you can invite more bidders or investors at no extra costs.
While allowing more parties to be involved in a transaction at any point, VDRs also allow greater feedback for the admin of the data room as they keep a detailed audit trail of user activity. This means you can see who viewed which documents, and therefore what your potential bidders or investors are most interested in. You can use this information to your advantage by, for example, adding extra information that might compliment your business.
The ability to have more bidders for less or no extra costs means more competition over your offering. This increased competition coupled with the feedback tools will allow you to choose whichever party you believe offers the most value, and so maximizes the total value that you can receive from any transaction.