It may come as a shock but various studies have shown that merger and acquisition failure rate is minimum 50 percent and even has chances to get as high as 70-90 percent. As the risk of failure is so high, both the companies have an obligation to carefully perform the merger and acquisition due diligence and any kind of buyer concerns should be addressed before they snowball into a real problem.
We will now discuss top 3 buyers concerns during the merger and acquisition process.
- Transparency- Failure is likely for your merger and acquisition deal without complete transparency for both the parties. Transparency for both the parties is very important during an merger and acquisition deal as this transaction is one of the most vital event that any businesses goes through. Both the parties should have full knowledge of the risks and implications of the deal. The list of questions that the potential buyers have most often then not can be only answered by sharing company’s sensitive documents and data. To avoid lack of transparency and in order to improve transparency companies use a virtual deal room (VDR). Virtual deal rooms also know as virtual data rooms (VDR) are used by both parties to share confidential documents and data as it is an online repository that makes sharing of these sensitive information much more easy and safer. Sensitive documents like companies financial statements, company’s strategies and any other required information can bbe shared between the two parties with ease and utmost security with the help of virtual deal rooms (VDR).
- Inflated valuation and Questionable strategies- Valuation is based on various and large range of factors like earning potential of the company in the coming future and the buyer’s/seller’s ability to negotiate. Many businesses see other businesses in the same industry getting very high valuation and thus come to a conclusion that their business will also be able to match the same amount of valuation while selling it. Setting up a high asking price needs to be backed up with good arguments and solid evidence as by taking aggressive negotiating stance with solid evidence and potential future of the company the buyers may decide to just walk away even before negotiations are underway. Because no buyer would even considering buying your company if they knew that it would decline in value after the transaction. Merger and acquisition buyers are very smart buyers and they have their eyes and ears open for all the warning signs and potential red flags of the company. Downslide is one of the major factor why sellers are looking to sell off the company in the first place which may scare off a buyer during an merger and acquisition. Other facts like inability to keep up with changes that occur in the industry, newer competitions in the same industry, technological evolution, aging and dwindling customer base and more are some of the other red flags that come under questionable strategies.
- Cybersecurity risks- It is very obvious that the data stored in these virtual data room (VDR) are highly sensitive and are meant to be confidential. But if this data is vulnerable it will end up causing a huge loss to the company. Data breaches and cyber attacks compromise all the sensitive data and documents of the company and puts them in a vulnerable spot. Thus choosing a right virtual data room (VDR) is very important as the merger and acquisition buyer would be for sure on the lookout for security flaws and issues in your IT department.
The DocullyVDR team is a provider of a new generation secure data sharing platform designed for businesses. The team has extensive experience in working with document sharing platforms and has been assisting the Virtual Data Room community since 2019 by providing users with free information.