VDR software comes in handy for vertical M&A deals

Today, mergers and acquisitions do not lose their relevance for the business environment due to the dynamism of market development and the presence of a large number of competitors. Effective and justified mergers currently help a company or enterprise to maintain its market share, as well as to take a leading position in it.

M&A of companies: concept and motives

M&A is a current dynamic trend in the development of modern corporations. The main reason for the rapid increase in this trend is a competition that forces businesses to actively seek investment opportunities, effectively use all available resources, and optimize costs. Expanding their capabilities, companies create diversification and restructuring strategies. From this point of view, transactions in the field of corporate control are a natural reaction to changing markets.

M&A is a business integration option, providing control over the company, i.e. the ability to define its strategic and current tasks in the areas of production, investment, sales, and other activities of the corporation to achieve the goals set by owners. Control over the company is ensured through the acquisition investor of ownership of a significant share of assets in joint-stock capital of the enterprise, which creates a set of economic and legal rights required to run a business.

In a broad sense, a merger is understood as a process during which one company is formed from several companies. The takeover procedure is distinguished by the fact that the acquiring company buys out all or most of the shares from the shareholders of the acquired (absorbed) company. Thus, the shareholders of the acquired company lose their rights to a share in the capital of the new combined company. Thus, mergers and acquisitions are a procedure for changing the owner or changing the ownership structure of a company, being the final link in the system of measures for its restructuring.

There are three main forms of mergers and acquisitions:

  • Horizontal mergers and acquisitions involve the amalgamation of companies operating and competing in the same area of activity
  • Vertical mergers are combinations of companies belonging to different stages of the same production process.
  • The mixed (conglomerate) merger is a merger in which, as a rule, several companies from different industries or geographic regions participate in order to diversify the business.

The role of VDR services in M&A deals

It should be noted that the activity in the M&A market goes far beyond the usual mergers and acquisitions. In the modern sense, this market also includes the separation or sale of assets when a company allocates part of its business units to independent corporations; different kind of reorganization, when a company restructures its capital structure, to change the motivation of managers; buyouts of open companies groups of private investors. 

Virtual Data Room plays an important role here as it is a kind of archive of documents. It is a tool with which potential investors can obtain and analyze data. Of course, no one canceled e-mail, faxes, disks, and flash drives. But when it is necessary to regularly transmit confidential information of a large volume, the advantages of data room software are obvious.

The well-known VDR services s in the global marketplace are:

  • iDeals Virtual Data Room
  • Intralinks Dealspace
  • Box Virtual Data Room
  • CapLinked
  • Citrix ShareFile
  • Merrill DataSite
  • Brainloop Secure Dataroom