The most typical application of virtual data rooms (VDRs) is during merger and acquisition (M&A) processes. These repositories offer a location for the due diligence required throughout the deal’s conclusion. Large papers, many of which are private and contain sensitive information, are used in these business operations. All interested parties can study and exchange papers while conducting talks safely and securely by using VDR.
Businesses frequently collaborate to create and manufacture goods, construct buildings, and provide services. Contracts and routine data transfer are necessary for establishing and maintaining these economic connections. These contracts are stored in virtual data rooms, making the documents required to maintain commercial relationships easily accessible.
Attorneys, accountants, internal and external regulators, and other interested parties can access a single point of access using a virtual data room. A centralized approach cuts down on mistakes and wait times. It also offers transparency in communication. The degree of access and authority varies based on the type of audit.
What Are Mergers and Acquisitions?
Before looking into the value of data rooms for M&A, it is important to comprehend the fundamentals. When one business entity joins forces with another or buys a stake in another, that is a merger or acquisition. Due diligence is one of this procedure’s most important and time-consuming steps. Before signing the contract, the buyer will want to evaluate the project’s quality and comprehend liabilities, obligations, and hazards.
In 2021, the M&A sector had historic growth. By May, it had increased by 158% over the same time last year.
Numerous risk factors and circumstances could go wrong with M&A Community. The inclusion of both the buy-side and sell-side M&A in the process is one of the issues at the same time. More businesses are using deal room software to prevent this bad outcome.
Advantages of Data Room Software for Mergers and Acquisitions
Although the value of a virtual data room for M&A cannot be disputed, it is necessary to make the most of it. An established and reliable VDR provider typically ensures a comprehensive range of opportunities for mergers and acquisitions, particularly:
- With the use of cutting-edge protocols and digital tools, corporate information is securely stored
- The value of the transaction is maximized for the seller
- Several prospective bidders may access documents at once
- Data copying and downloading are prevented by screen blocking and watermarks
- Fast and simple document review during M&A
- Complete adherence to national and international laws
- Every bidder’s action in the data room is observable by the seller
- Improved transaction effectiveness
- Better cooperation amongst teams
VDR quickly gained popularity after being launched to the market since it is a useful tool that has made M&A insights and many other processes easier. The business owner can securely share information with other participants using a digital data room.
The key benefit is managing all partner behaviors, such as when they visit the data room, how frequently they read particular documents, and other things. Due diligence, including but not limited to VDR providers and during various legal actions to preserve confidential data and intellectual property, is made unavoidable by the highly regulated access feature of data room M&A.
Virtual data rooms (VDRs) are now utilized in most mergers and acquisitions. In actuality, a virtual data room is the best option for performing due diligence, storing all the material during the pre-phase of due diligence, and maintaining a website for communication during the post-phase.
Oil and Gas M&A Activity
In 2022, shale and subsea were the two main factors that influenced significant M&A deals in the oil and gas business.
- Shale: US-based shale gas producer, Devon Energy, has agreed to buy exploration and production firm, Validus Energy. In addition to Devon Energy’s current leasehold in the Eagle Ford shale basin, the acquisition secures 42,000 net acres for the business, expanding its current footprint.
- Subsea: Capricorn Energy and Israel’s NewMed have agreed to merge. The acquisition also included opportunities in offshore Mauritania and the onshore Western Desert of Egypt, as well as interests in the Chevron-operated Leviathan and Aphrodite eastern Mediterranean gas projects.
In the oil and gas industry, where large-scale M&A deals are common, VDRs have become an essential tool for managing due diligence and deal execution.
Oil and Gas Industry M&A Deals
According to the annual report by energy intelligence and analytics firm Enverus, deal activity in mergers and acquisitions (M&A) for the upstream sector of the oil and gas industry slowed significantly in 2022. Enverus identified 160 deals totaling about $58 billion for the calendar year, with only 26 transactions totaling $13 billion coming during the 4th quarter.
While the average deal value only declined by about 20%, the volume of transactions fell to a two-decade low. During the back half of 2022, deal activity was dominated by large-cap public companies, such as Devon Energy, Diamondback Energy, and Marathon Oil.
Oil and gas industry M&A deals of Q4 in 2022: Top deals
In November 2022, the European oil and gas industry saw a total of $5.3 billion in mergers and acquisitions, with the top five deals accounting for 96.1% of that value. The combined value of the top five deals was $5.05 billion. According to GlobalData, the top five M&A deals in the oil and gas sector for November 2022 were:
- Chart Industries’ acquisition of Howden Group for $4.4 billion
- Oriental Sunrise’s purchase of Total E&P Dunga for $330 million
- Yildirim Group’s asset transaction deal with Elementis for $170 million
- Navios Maritime Partners’ asset transaction for Two Aframax Vessels for $121 million
- Shandong Weifang Rainbow Chemical’s acquisition of Exclusivas Sarabia for $33.44 million.
A merger is a business transaction involving two firms, often of comparable size, in which the shareholders of the original two companies jointly own the shares of the combined company. This is different from an acquisition, in which one business (the buyer) purchases all of the outstanding shares of the target business, and the owners receive the proceeds from selling those shares.
A quality virtual data room will allow for transaction archiving. This collection acts as a deal bible if the disclosures and material from the due diligence are ever needed. Customers are typically interested in this service because it offers safe, always-accessible storage for data kept up to date by a third party.