Regardless of company size, sharing sensitive data for mergers and acquisitions or other corporate transactions is a critical process. To keep information private and secure, companies leverage virtual data room platforms that are purposefully built to ensure seamless and secure document sharing between parties. But the virtual data room market is exploding, and it seems every file sharing platform is trying to get a piece of the pie, making purchase decisions more complicated than ever.
In this article, we round-up what we believe are the top 5 virtual data room (VDR) providers, go into more depth on retail file-sharing platforms, and explain why we think they aren’t the best option for VDR needs.
Choosing a Virtual Data Room Provider
Not every virtual data room (VDR) will work for every user or business need, so there is no easy way to choose. It’s not a matter of legacy provider versus new kid on the block or security versus shareability. Instead, it’s critical to think about your business context and pick an interface, feature set, and platform that serves your needs.
There are well-known legacy providers that maintain an older-style interface, packed with features — some of them useful, many of them not. Other, more modern providers provide core features while avoiding unnecessary bloat, complexity, and confusion.
One ensures all those documents are tracked and remain both protected and under your control.
Considering and Analyzing Pricing Structures
Cost structures of VDR providers typically fall into two types: pay-per-use or unlimited use. With pay-per-use, your VDR fee depends on several factors, including storage space, number of users, and time needed to keep your VDR open. This is where unlimited plans come in handy since you can more easily forecast your costs with one fixed fee. 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.
Pay attention to support levels
While everyone wants the best price, you also have to consider the level of support provided both to you as a VDR administrator and to any third parties that you invite into your data room to review documents. Business deals don’t operate on a 9-to-5 schedule. If a user can’t access the documents they need to review, they need to reach the vendor’s support 24/7/365 without any voicemail runaround or delays. Further, pay attention to where support is coming from. If the company outsources their support or has multiple tiers, you may not get the support you need, or you’ll have to talk to unknowledgeable people first before getting to someone who can actually solve your problem.
Virtual data room pricing checklist
When you’re assessing virtual data rooms, here’s a running checklist of how data room providers charge for their service.
1. The number of projects
Some VDR providers have unlimited plans while others charge by the deal. Consider how many projects you run in a year since it might be more economical to go with an unlimited option.
2. The number of pages
While per-page pricing might appear lower, it’s difficult to predict the actual costs because overages can happen at any time, causing unwanted friction in critical moments of the deal.
3. The number of users
Some platforms charge for both organizational (internal) users and guest (external) users. Others only charge for internal users. If going the pay-per-user route, make sure it’s just for organizational users, as the costs for guest users may be difficult to predict, and leading to overage charges, similar to the per-page model.
4. Storage
Providers will typically charge per gigabyte of storage, with overage fees charged once that storage limit is exceeded.
5. Length of the transaction
Some providers offer a set price for a period of time, for instance, 3, 6, or 12-month windows.
6. Customer support and onboarding
Make sure your provider offers 24/7/365 support with a clear service agreement and fast response time that supports all users, including anyone you invite to the data rooms.
7. Professional services included
Some providers offer services like deal archiving or subject matter experts to help you to set up and structure your data room, check permissions and assist with data migration. Ensure you know which providers offer what (and if it’s included in the price or extra).
Purchasing pro tips
If you’re ready to purchase, here are three key tips to get you off to the right start:
1. If you have multiple projects, opt for an unlimited subscription model
An unlimited subscription will not only help you with M&A or financial transactions but can also streamline RFPs, compliance, audits, board reporting, and fundraising processes.
2. Prioritize support offerings
You don’t want to be fielding calls from users. Make sure your provider can handle all issues that people face.
3. Focus on predictable pricing
The last thing you want is to have a great deal come through, only to face massive overage charges for something unpredictable like the number of pages.
Top 5 VDR providers
1. Firmex (Editor’s choice)
We believe Firmex’s mix of unlimited use options, advanced features, and customer service make it the best all-around virtual data room. The company itself hosts 15,000 data rooms per year, making it the largest provider globally.
Firmex pros:
- Unlimited usage: With unlimited plans, Firmex can lead to a significant cost-saving, including the average annual cost of a virtual data room platform when opening multiple rooms per year.
- Flexible, transparent pricing: Firmex offers its customers the flexibility to choose between either pay-per-use pricing or an unlimited-use subscription. In both cases, users exactly know what they are paying for. Since many projects exceed their planned data room usage, the subscription offering can make a world of difference in allowing you to focus on your deal while not worrying about uploading an extra page or two.
- User-friendly controls: Firmex’s user interface provides users with greater control over how documents are viewed, managed, and shared, with easy and intuitive user management, document watermarks, restricted viewing, saving and printing, and advanced features like a Q&A module and redaction.
- Customer service: Of all the vendors we looked at, Firmex had the best customer service with a 15 minute response time, a robust knowledge base, and a team of subject matter experts to help with the administrative side of your deal. The platform also offers bulk file configuration, additional security checks, and project archiving, so deals are never lost.
Firmex cons:
- Not a deal marketing platform: As a purpose-built tool, Firmex is a great data room suited for deals, diligence, and compliance. This narrow focus means it lacks additional features, such as dealing with Customer Relationship Management (CRM). However, we don’t see this as a drawback since many deals don’t need this type of functionality, as specialized providers would far better serve users.
- No artificial intelligence: Firmex does not have any AI capabilities right now. But this isn’t a drawback since the promise of AI’s effectiveness for data room usage has yet to prove its value. There’s little evidence to show that AI provides any new insights beyond what an experienced dealmaker can deliver.
2. Intralinks
Intralinks is one of the oldest data room providers globally, and their data room product has a similar feature set to Firmex.
Intralinks pros:
- Multiple solutions: Intralinks offers products outside of the deal space, such as investor communications and TNR accounting solutions.
- Oldest provider in the space: Intralinks was the first online data room provider.
- Community: Intralinks has its own community where deal makers can source deals, similar to other networks such as Axial Markets.
Intralinks cons:
- Pricing: Intralinks’ pricing model is complicated and based on multiple value levers that frequently result in significant overages. Besides, it can be incredibly cost-saving if you run multiple deals a year.
- Complicated platform: Intralinks support must be contacted to set up a new project, adding unnecessary complexity if you’re running multiple projects per year.
- Outsourced, tiered support: Not everyone is treated the same. Although not explicitly stated, company size, project size, and relationship with your representative seem to impact the level of support. Whatever the reasons, support is not consistent from one client to the next.
- Clunky features: Features like bulk download require multiple extra steps that add to administrative burdens for users.
3. Data site
Data site is another legacy provider, founded in 1999, with similarities to Intralinks and Firmex.
Data site pros:
- Security: Data site has incredibly robust security, similar to Intralinks and Firmex.
- Multiple solutions: Like Intralinks, the Data site has solutions outside of the deal process, such as deal marketing.
- Community: Data site has a community forum for dealmakers to connect.
Data site cons:
- Complicated pricing: Pricing is per-page, with additional charges for “irregular” and media files. This results in many deals going beyond their expected scope, which may lead to significant mid-deal overages.
- Slow service: Despite service is available 24 /7 / 365, we’ve heard reports that response times can be slow, causing issues and delays for users.
- Difficult to use: Data site has many additional features that work in edge cases, but each additional feature makes the core platform slightly more challenging to use, resulting in a lower value for users overall.
4. Ansarada
Ansarada is an Australian data room similar to Firmex, Intralinks, and Merril. Despite dealing with a merger, they are a significant player in the space.
Ansarada pros:
- AI-forward: Ansarada has led the way in applying deal AI to deal with insights. As mentioned previously, though it’s doubtful whether this provides any real insights over standard reporting and the judgment of seasoned M&A professionals, it is an exciting idea.
- Deal preparation: Ansarada has tools specific to deal with preparation and collaboration. Firmex, Intralinks, and Data site can handle similar processes.
Ansarada cons:
- Limited core functionality at lower price tiers: Lower tiers operate more like basic file sharing and don’t have core data room functionality. Full functionality can get expensive.
- No real subscription offering: A subscription offering would provide greater flexibility regarding storage, with the benefit of predictable monthly pricing.
- Limited resources and support: Ansarada focuses on its highest tiers, meaning most external users receive limited support and resources. This can result in you getting more calls from other parties in your transaction instead of the Ansarada team handling the issue.
5. Venue – Donnelley
Founded in 1870, Venue’s parent company RR Donnelley is one of the United States’ oldest companies. RR Donnelley acquired Venue under the Donnelley Financial Solutions (DFin) brand, which offers a data room product similar to Intralinks, Firmex, Data site, and Ansarada.
Venue-Donnelly pros:
- Bulk printing: Venue’s platform can bulk print data room documents. Similar to Intralinks and Data site venue, multiple solutions offer solutions outside of the data room space, such as RBOR and EDGAR filings.
Venue-Donnelly cons:
- No API: The Venue platform requires full adherence and does not play nicely with other business platforms.
- Less robust data room feature set: While the platform has an executive dashboard and deal room function, it lacks other robust data rooms.
- Expensive for multiple projects: The pricing tier structure means that any company running multiple deals or looking to use data rooms for other processes will face high bills.
Other secure file sharing platforms
When it comes to secure file sharing, virtual data rooms are not the only option on the market. However, our recommendation is to buy purpose-built technology. While other providers can offer security, M&A and other corporate deals have many intricacies that a simple, secure file sharing platform can’t match. When sharing large volumes of documents, in staged processes, with external stakeholders, such as due diligence, purchasing a data room will save you time, headaches, and reputational risk.
1. Box
The box is more focused on internal collaboration than being a true virtual data room. Key risks of using Box as a virtual data room:
- Admins can log in to any user account.
- Basic virtual data room features are not available below Business Plus & Enterprise plans.
- No granular permissions, which could cause delays in multi-stage due diligence processes.
Citrix, the parent company of ShareFile is not prioritizing data rooms. Couple this with a data breach in 2019 and ShareFile does not stand up to the test of a good virtual data room.
Key risks of using ShareFile as a virtual data room:
- The unintuitive interface means room for human error.
- File size limits mean the platform may not work for larger deals.
- Slow report generation capabilities and no watermarks on Office file downloads mean limited security and more inconvenience.
- The support staff may be unfamiliar with diligence but also unfamiliar with the product itself.
Sharepoint is great for internal document sharing but is challenging to use when you need to share documents outside of your organization. As a result, many organizations end up connecting share points to their data rooms through the use of APIs.
Key risks of using Sharepoint as a virtual data room:
- Additional internal resources are required to build and configure Sharepoint with a virtual data room provider, adding costs and time to the process.
- Using Sharepoint means relying on your company’s internal IT support team for projects. This could cause delays for time-sensitive deals, and it’s unlikely your internal team is prepared to support the nuances or tight timelines of an M&A or corporate finance deal.
- Linking Sharepoint to a virtual data room creates unknown unknowns where a slight mistake in the implementation could lead to a data breach or unidentifiable problem.
Generic document collaboration providers (Dropbox, Google Drive, OneDrive)
Much like our recommendation for other secured file-sharing platforms, we recommend selecting a purpose-built solution for virtual data rooms. While it can be tempting to leverage existing platforms in your organization, the risks outweigh the benefits.
Key risks of using general document collaboration providers as a virtual data room:
1. Unprofessional: High-value business deals need a professional data room. Sending a Google Drive link could result in people assuming you are an amateur.
2. Limited configuration: Permissions, sharing and user management is all lightweight in these providers, meaning additional risks of privacy breaches in a corporate deal.
3. Blocked by most financial institutions: It’s possible that internal employees at your bank or other financial institution won’t be able to open the files because of known security risks with these platforms, causing unnecessary delays and embarrassment to your deal.
Conclusion: Purpose-built all the way
When choosing a virtual data room, it’s critical to select a platform that’s built for the job. While many platforms on the market claim to have virtual data room features, in reality, only a small handful can truly do the job. Regardless of deal size, a merger, acquisition, or financial transaction between companies is a critically important process to get right. When it comes to your business’s future, your reputation, and your ability to get the job done right, don’t leave it to generic providers.
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