M&A is essentially due diligence. This means that the seller shares with the buyer their most important financial, personnel and corporate information, and the prospective buyer or buyers can examine these documents and come to a conclusion as to what an asset is worth.

But how can a deal team assure its board of directors, chief executive and member-owners there will be no leak of sensitive information or, even worse, a hack?

In truth, no such guarantee can be given. Deals are run by humans. Humans are fallible. However, there is technology that can help: Virtual data rooms.

Data Rooms Can Reduce Data Leakage

A specialist M&A data room can store documents securely. File-sharing services or a USB file cannot. Yet, some dealmakers insist on using generic cloud-based software, sharing a USB thumb drive or using email for a merger or acquisition or to share documents during a deal. This increases the likelihood that sensitive information will make its way into the public domain, opening the door to litigation and a transaction's failure.

If a credit union is concerned about document security, it should use a data room. An M&A data room can help secure documents the same way Tom Cruise's fictional "Mission: Impossible" character, Ethan Hawke, is confidentially briefed by his employer, the intelligence agency IMF, which then destroys any record of the briefing "in five seconds." A data room keeps documents in a secure environment where access is only given by the seller or an administrator of the deal. Moreover, even if documents are taken out of a data room and saved electronically, a specialist M&A data room can "self-destruct" the documents regardless of where they are saved or stored. A data room focused on M&A can also track the printing of secure PDF documents – identifying and recording the user and computer's location (via an IP address).

The protocols surrounding the establishment of security protocols for data room access during mergers and acquisitions begins when the data room is open. For those new to the M&A process, a specialist M&A data room provider with 24/7 customer support can help talk a credit union dealmaker through the establishment of the protocols and walk him or her through the upload and document management process.

As cybersecurity is now the No. 1 information technology issue for most companies, specialist data rooms offer important precautions to help ensure an M&A deal is safe.

A credit union should insist that all questions and answers regarding the deal are done through the data room. If questions are emailed and the reply to the question is also in an email, news of the M&A negotiations could easily become public knowledge. Moreover, the threat of litigation from allowing questions to be emailed back and forth outside the data room may become very real if there is a dispute after the transaction's closing. Q&A inside the data room can clearly show what questions were asked, what answers were provided (by whom and when) and what supporting documents were viewed, leaving a discernible deal audit trail that can provide comfort to all parties.

A Q&A process inside a data room also enables sellers to address key issues by allowing bidders to prioritize questions. This helps the deal process move much more quickly, as the seller knows it is always addressing the most important questions a bidder wants answered. The Q&A process also identifies which questions have not been addressed.

This Message Will Self-Destruct

A credit union doing a deal should also make sure security settings are applied to bidders, folders and documents. Document security should be discussed by all members of a credit union deal team so everyone knows what the security settings are before bidders are invited into the data room. A good customer service representative at a specialist M&A data room can help establish such document security.

Finally, if you want to be like Tom Cruise and enjoy the security that comes with the possibility that deal documents can be destroyed remotely, security policies should be verified every time documents are accessed.

Using a data room is also beneficial once a deal is closed. A complete archive of all that happens inside a data room can be provided, reducing the chances of any litigation from the deal, as the actions of all bidders and the seller are transparent.

Larry Fontillas is managing director, Americas for ansarada. He can be reached at 312-466-5555 or [email protected].