How to Build an M&A Pipeline using virtual data room

M&A pipeline can be built using virtual data rooms, as well as technologies. Modern technologies, firstly, reduce the need for physical contact between producers and consumers, and secondly, they allow new products and services, not previously presented on international markets, to become an object of trade. At the same time, the costs of servicing the turnover of goods and services are significantly reduced.

Building an M&A Pipeline Using virtual data room

The conducted historical analysis allows us to determine the factors that significantly affect the dynamics of building the M&A pipeline using a data room. First, legislation, in particular antitrust regulation, is a particularly significant specific factor. For example, in the United States, the regulatory bodies for mergers and acquisitions are the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve. Their powers include consideration of the grounds for planned mergers and acquisitions, after which, if a positive decision is made, the materials are transferred to the supreme antimonopoly body – the Ministry of Justice, which sets out the main rules and principles governing the possibility of such transactions.

Secondly, the high dynamics of the M&A market are ensured by low-interest rates, which makes it possible to attract external financial resources for acquisitions of companies, and also leads to high profits for investor companies. An indirect confirmation of this argument can be that about 60% of the value of all M&A transactions is paid with the help of cash (own and borrowed), and the share of shares as a means of payment is decreasing.

Thirdly, the growth in the number of mergers and acquisitions is influenced by the norms governing foreign economic relations between the EU countries. In the case of transactions between companies from different countries, the parties cannot offer options in exchange for shares and have to pay in cash. A significant role in this is played by the slowdown in economic growth in the EU countries, which makes M&A deals in these countries too costly.

Advantages of Pipeline Using Virtual Data Room

A virtual data room as a form of organization has the following advantages:

  • increases the motivation of management through decentralization, increases the degree of its responsibility and transparency;
  • increases the ability of top managers to control due to the ability to assess profit relative to the invested capital;
  • increases the efficiency of the company as a whole by attracting additional capital to those divisions that have the greatest return at the current time.

Conglomerate mergers are, to a certain extent, the result of the increased concentration of scientific research in the field of enterprise management, which began in the middle of the 20th century. In conglomerates, conditions are created for the transfer of capital from one industry to another, bypassing the traditional capital market.

Liberalization of world trade and foreign exchange regulation ensured an increase in the number of mergers and acquisitions carried out based on the exchange of securities without spending significant funds. This stage is characterized by the formation of industrial and financial supergiants, the creation of transnational corporations – TNCs (super concentration of companies).

Given the massive implementation of the data service, the most widespread practical application during this period was absorption through privatization. This method acted both as an independent mechanism and as a form of expansion of the first corporate structures (financial and industrial groups and holding companies).

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