An acquisition, involves one company 'swallowing' another and establishing itself as the new owner, whilst a merger occurs when two companies combine assets to form a single entity. In the case of acquisitions, the stock of the buyer will continue to be traded, whereas in the case of a merger the stocks of the two companies are surrendered and a new company stock is issued.

With increasingly strict documentation requirements in due diligence, the process can considerably delay end results, leading to significant growth in the overall budget. The development of business led technology to expedite due diligence is a core feature of the next generation of virtual data room providers. Using a VDR in M&A deals makes the entire due diligence process efficient, cost effective and more comprehensive than ever before. As a result, VDRs are increasingly playing a major role in the successful execution of mergers and acquisitions.

Newer versions of virtual data rooms now offer functionality to streamline the question and answer component of due diligence. Unlike the traditional online data rooms, the next generation of providers accelerate response time for Q&As, with role based systems that can be used to segregate access and route questions to the appropriate respondents. Tracking of Q&A workflow delivers instant visibility and highlights any delays in the process. The traditional approach of multiple emails and spreadsheets are cumbersome and can become a heavy administrative burden.

Next generation data room providers are also able to provide tools which can be used to heighten competitive tension between potential bidders. The ability to apply full anonymity to bidding parties, as well as random question I.D.s, lets the deal manager hold complete discretion over the questions and answers revealed within the online data room.

Through a quality data room, sellers are able to closely assess the legitimacy of bidder interest. Advanced technology used within new versions of online data rooms have capabilities to instantly generate reports on bidder activity history, so that sellers can see in granular detail, which bidders accessed which documents and when . The granular depth that the generated reports also protect the seller, with legal grade reports for necessary security, compliance and proof of disclosure measures.