The data room industry has a secretive way of charging customers that is massively inflating costs for dealmakers.
The odd thing is, most M&A advisors are aware of it, yet it’s seen as the normal way of doing business.
I’m talking about the ‘per-page’ pricing model – a bizarre but common method of charging for data room storage.
Here’s the thing: you start working on a deal, whether you’re with a major advisory firm or a smaller boutique, and you’ve set a budget for the technology. You know what you or your client expects to spend.
But with this legacy ‘per-page’ model, that initial quote is often a ruse. By the time the deal closes, the VDR cost can suddenly explode to five or even ten times the original price. At Ideals, we’re one of few VDR vendors that don’t use this pricing model, and I struggle to understand why M&A advisors put up with it.
Undermining trust with M&A advisors and their clients
Whether you’re storing data in the Cloud or on your computer, you’ll expect to measure and pay for storage in MB and GB. So why do some data room providers charge ‘per page’ instead?
The whole model is confusing and outdated, and really that’s the point. It enables vendors to quote one price at the beginning of a contract, only to whack on lots of extra fees for spurious reasons.
This is where the humble VDR – a fundamental operational tool meant to streamline due diligence – turns into a source of contention. Deal teams work under intense pressure and have complex negotiations to focus on, they don’t want to have to be bothered with their client’s VDR bill.
In most cases, the cost of the VDR is relatively small in the overall cost of an M&A deal. This means advisors and their clients might roll their eyes when the hidden costs start to stack up, but it’s not worth spending time debating it.
Unfortunately, data room costs are increasingly becoming a point of friction. Speaking to dealmakers, I’ve heard numerous horror stories where the world’s biggest M&A advisories have been blindsided by unexpected bills that run into six figures, with one reaching upwards of €1m.
An Ideals customer in Spain told us they left their previous VDR provider after a legal dispute over a €90k invoice.
The end result is that the VDR provider gets blacklisted, but it’s also a very difficult conversation for M&A advisors to have with the end client. And it chips away at the trust and confidence that is integral to getting deals done.
How do M&A advisors get hit with hidden fees?
Let me first be clear – at Ideals we don’t use the ‘per-page’ model. We offer clear, upfront pricing, meaning you can accurately predict your costs and don’t have to worry about hidden fees.
However, if you work in M&A then it’s likely you’ll have come across ‘per-page’ pricing and might have fallen victim to one of these tricks:
A ‘page’ is typically defined as a standard PDF, but transactions involve many file types – Excel, PowerPoint, Zip files. Vendors apply different conversion rates to these non-PDF files, making upfront cost estimation a guesswork.
Deals take longer than expected; it’s a reality of M&A. Instead of a fair, prorated extension fee, legacy vendors often slap on penalty charges that are 2x or 3x the original monthly rate.
The client prepares for due diligence, edits a document, deletes it from the VDR, and re-uploads the updated version. They are charged for each upload of the same page, meaning a single file edited and updated 10 times costs 10x more.
Overall, this puts M&A advisors on the back foot and makes it almost impossible to predict the final bill.
VDR vendors are openly vague
This lack of transparency is the real issue. One well-known VDR vendor states plainly on its website that:
Billable pages may not match the actual pages in a document. For example, a 10-page document that was redacted has a billable page count of 20. Billable pages increase when documents are replaced, redacted, or converted to PDF format.
Another makes it clear that:
Datasite reserves the right to modify KB-per-page conversion rates at its sole discretion and without prior notice.
It gives all VDR vendors a bad name and makes us look like shady used-car salesmen, while undermining the trust that’s built up between M&A advisors and their clients.
My priority is to give clients budget certainty, ensuring they can focus on their deal without worrying about getting ripped off by their VDR provider. It’s about time the rest of the industry caught up.
