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Online Datarooms - Focus on Mergers and Acquisitions

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Nick Navarra


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Online Datarooms - Focus on Mergers and Acquisitions

Posted 18 May 16 by Nick Navarra

Many people have now embraced cloud storage services and online datarooms, particularly in the business world – they offer convenience and are often free. However, with convenience, comes risk.

Like many people I suspect, I am a subscriber to a number of cloud storage services including Dropbox, Google Drive and Microsoft OneDrive and have occasionally used these services for business purposes when I have been invited to a shared folder by parties on the other side of a transaction.

However, we were recently shown an example of a major security flaw with one of these free services which has led us to seriously consider whether or not we continue to use any of them in the future, even when invited to a shared folder by non-clients or their advisors.

In this real example, an advisor received a “team” invitation from an external party on the opposite side of a transaction. This “team” invitation looked very similar to a normal invitation to join a shared folder and so it was accepted. By accepting this “team” invitation, the inviter gained full control of, and access to the invitee’s cloud account, including all past folders which had been shared by other external parties with the invitee. This choice was irreversible and was extremely easy to fall for – there were no adequate warnings to the dangers of accepting this “team” invitation.

What are the Alternatives?

Gone are the days of visiting the lawyers’ office to rummage through piles of physical folders for a due diligence process. When advising clients regarding datarooms, we will always recommend that they select a paid online service specially designed for M&A and other corporate transactions. In Australia, the two most popular services are Ansarada and Intralinks.

These paid services have a starting cost of around $3,000. Clients are often reluctant to spend money for a service which they believe they can get for free from the likes of Dropbox and Google Drive. This is particularly the case in relation to small transactions.

It is important to note however, that these specially designed services offer more than just ‘storage’ – they offer security and efficiency which more often than not, will pay for themselves in the long run. Some of the features that they provide include:

  • advanced individual document security, including the ability to prevent printing, downloading and even self-destruction capabilities;
  • flexible user-access configurations including the ability to set varying security policies for individual users and/or user groups, even at a document level;
  • tracking and auditing functionality providing the ability to see who has accessed what documents, when and how often;
  • advanced Q&A management functions. Q&A functionality is probably one of the greatest advantages of using a specialist online dataroom, making the whole Q&A process much more efficient; and
  • the ability to maintain a complete record of the due diligence process, including document history, Q&A history and access history.

Corporate transactions can be high risk and maintaining confidentiality is vital. Parties are opening themselves up when there is no guarantee of a successful transaction so it is equally important that shared information is kept secure at all times. A specifically designed dataroom is the only way to achieve this.

Originally posted on NickNavarra.com.au


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