A virtual data room, or VDR, is an M&A professional’s stock-in-trade. These specialized solutions for sharing large volumes of sensitive documents beyond the firewall are an unavoidable part of M&A dealmaking. Data rooms help to ease the burden and risk of disclosing confidential documents to third parties during the due diligence phase of an M&A transaction. Newcomers to the world of investment banking and M&A often cut their teeth on the painstaking tasks of document management, disclosure and diligence – more often than not with a managing director breathing down their neck!
Despite the fact that data rooms are an indispensable tool for M&A, many investment bankers and advisors have an unfortunate tendency to assume that all virtual data room solutions are basically the same. In truth, cost structures can vary widely between vendors – and these differences can have a significant impact on the value and versatility you get out of your data room investment.
Virtual Data Room Pricing Explained
Cost structures of VDR providers are similar to cell phone and internet plans. You pay a base fee, and then there may be extras based on features. Some firms may also offer unlimited plans that allow you to use the VDR for different projects and use cases at a predictable cost. When assessing solutions, you’ll want to understand how you will be charged for the service – e.g. by the page, the number of users, storage size, duration of the project, etc. – to avoid any unexpected costs or overages down the line.
In the video below, we provide a quick overview of how data rooms are priced, what you need to know about data room service fees and the questions you should ask service providers upfront when considering a virtual data room.
The Value of Support
When evaluating a data room service, consider the level of support provided to you as a customer/VDR administrator, and to the users/third parties that you invite into your data room to review documents. M&A deals aren’t 9-to-5 and if a user can’t access the documents he or she needs to review, they need to be able to reach the vendor’s support 24/7/365 without any voicemail runaround or delays.
While it may be tempting to use a generic file sharing tool to conduct due diligence, remember that these basic tools aren’t designed for the rigorous demands M&A dealmaking where there’s a high degree of urgency and third parties can’t sit on their hands waiting for a VDR provider to get back to them about the issue they’re having viewing documents. Another good way to look at this is, ‘Would you rather the user called the VDR provider’s support team at 2 a.m. or you directly to troubleshoot the issue?’
Discover a virtual data room that's made with you in mind.
Learn more about serious sharing by booking a live one-on-one demo.
A Data Room Pricing Checklist
To recap, here are the metrics by which VDR providers typically charge for their service:
- By the page (with overages if you exceed the page limit).
- By the number of user licenses – A set number of data room users are included, and you pay extra for each additional user.
- Storage size – How many gigabytes of document storage do you require in your data room. Additional GBs of storage can be purchased if needed.
- Length of data room transaction – A set price for months is provided, e.g. 3, 6 or 12 months, and you pay month by month for the data room service after that. Often M&A transactions take longer to close than expected, so keep this in mind when evaluating data room charges.
- Levels of customer support and onboarding – How much involvement do you need to get the data room live and the M&A transaction up and running? Does the VDR support both you and your clients/users? Is the support 24/7/365? Is the service level agreement (SLA) 15 minutes of 24 hours? Ask specific questions: Say an overseas client can’t print a document at 2 am and calls the VDR providers support line. How long will it take for them to a live person who knows the deal, and can solve their problem?
- The number of transactions – Some VDR providers offer unlimited projects, while others charge by the deal. How many projects do you run in a typical year? If it’s more than one, it may make sense to consider an unlimited-use option to maximize value and versatility.
- Are professional services included? What do these services entail, e.g. are deal archive DVDs included at the end of a transaction? Does the vendor possess industry expertise that could make them a trusted partner in your dealmaking?
If you think all VDRs are the same, we hope this primer on data room pricing makes you think again. When selecting a virtual data room service to support your investment banking or advisory business, there are important factors that need to be taken into consideration. Ask the right questions upfront to ensure that you get the most out of your data room.