For many organizations, virtual data rooms have become a tool without which office work is no longer complete. In addition to the advantages associated with data management, the software also allows companies to organize seamless M&A deal execution. Here is more about it.
Why is automation critical in M&A transaction management?
Currently, more and more enterprises are switching to specialized software for automating work with contracts. Three years ago, the LegalTech market was estimated at $17 billion. In addition, in the next five years, companies will increasingly use artificial intelligence-based solutions to automate contractual activities. So, why is it important?
At each stage of the M&A process, a qualitative check of the contract is important, on which several specialists usually work at once. This procedure is called due diligence. Most often, the verification is carried out by an in-house lawyer, contract manager, or purchasing manager. Manual analysis of documents can take up to several weeks, and the conclusion of the transaction is delayed. As a rule, several persons are negotiating the contract, and each participant in the negotiation process makes their changes. Thus, the lawyer needs to re-analyze the document each time. At the same time, if the contract is not verified, the company may incur significant legal costs associated with violation of the terms of the contract. Such situations can arise for several reasons at once. For example, due to the lack of a common understanding of the principal terms used in the agreement, the disproportionate liability of the parties for non-performance of the agreement, unrealistic deadlines, etc.
How does a virtual data room change M&A due diligence?
The virtual data room is fundamentally changing the process of working with a contract. AI cannot only suggest changes to the text of legal documents but also optimize the contract management system. Most companies do not have a single database where all information on concluded contracts would be collected, and there is no tool for quick and accurate analysis of corporate documents. AI solves this problem: it searches the entire array of intra-corporate data, finds the required or similar document, provides explanations for the main provisions of the contract, and also offers hints to reduce risks or include more favorable conditions. Thus, the verification of one contract is carried out twice as fast. According to https://data-room.ca/vdr-pricing/, modern data room vendors offer different solutions for almost all business areas.
The digital data room helps the due diligence team to perform the following functions:
- accelerate the approval of contracts;
- reduce the number of errors in contracts;
- streamline the procurement document flow and achieve compliance with the regulations for working with contracts.
In addition, the data room automatically determines the type of contract, highlights key variables (dates, conditions, parties to the contract), and offers ready-made templates. The software searches through a huge contracts database and ranks and marks individual documents according to specified criteria. The program works with texts of any format and performs operations in seconds. Now you do not need to enter all the data manually- the software aggregates information in the system, selects a template, makes recommendations, and redirects the finished document to the right employee. The data room can automatically remind you of the deadlines for the execution of an agreement and generate a claim for breach of contract if there is no information in the internal system that the counterparty has fulfilled the obligation.