While the whole world is using shared workspace and productivity tools, many finance professionals are still sticking to the traditional data rooms while doing their due diligence. They rely on emails and public file sharing platforms while endlessly copying, pasting and scanning, and worrying.
Did someone already submit that document scan? Am I looking at the latest version of the contract? What’s the current status of the deal?
Data room for due diligence makes the whole due diligence process more streamlined, more time-efficient and more resilient to data leaks providing peace of mind for all people involved. That’s why doing virtual data room comparison before the deal is important.
Virtual data rooms for due diligence allow the sell-side team to maintain complete control over who has access to the documents and what these users are permitted to do with the information. The sell-side team can also respond to questions from users and manage other ways of communication with interested parties. After the deal has been completed, due diligence data rooms offer a full audit trail of disclosure through a single digital archive of all activity.
What is Due Diligence in M&A?
When you create the data room due diligence process the following document areas must be submitted to the potential buyers or other parties involved in the deal:
- Documents covering corporate structure and ownership
- Tax-related documentation
- Any document regarding intellectual property assets
- Complete details regarding material assets related to the company
- All existing and past contracts
- Documents on employees and details of the management structure
- All information regarding ongoing or past l
Due diligence can make or break the deal. This is why it is important to choose a due diligence data rooms provider that has extensive experience in dealing with due diligence and other stages of M&A process.
Building due diligence data rooms seems like a fairly straightforward process, but you must stick to some simple rules to present your due diligence documentation in a professional manner:
- Arrange and compile all documents before you upload them to the data room. This setup process can take long enough and in some cases up to two weeks. Since the data room fees can be costly, why waste paid time for paperwork that can be done on your end before you hire a data room provider? If documents are not compiled, scanned and arranged in folders before you sign up for a data room plan you are wasting a considerable amount of time and effort.
- Keep virtual data room due diligence folder structure simple. You should be using the virtual data room only for the actual purposes of the deal. By presenting your due diligence documentation in a clear and concise manner you are doing a favor to all deal participants. Automatic indexing feature offered by most data room providers should make this task easier.
- Choose the best due diligence data rooms you can afford. This would add value to the deal. Advanced data rooms offer such customization features as logo and corporate colors, customized watermarks, in addition to indexing, search and upload features. Convenient Q&A feature is another important step in setting up an effective collaboration place in the VDR.
Top-class virtual data room due diligence providers develop data rooms with advanced features that are optimally supporting the due diligence activity. Some of these features include:
Dynamic Index Building: this is a great way to upload large bundles of documents at a later date. This VDR for due diligence function arranges the documents in the proper order based on the online index so you don’t have to waste time and effort doing it yourself. Users always know that they have the updated data.
Ability to Upload Various File Formats: the best data rooms accept virtually any file format, not just Word documents. Advanced search tools allow searching for necessary information in all possible file formats. Some of the better data rooms even include automatic virus scanning on all incoming files.
Q&A Tool: VDR due diligence users and especially the buy-side team welcome the ability to discuss and ask questions related to the uploaded documentation. Sometimes buyers need some verification or request additional documents without the use of email. Now they can post their questions or inquiries directly in the VDR for due diligence room clearly referring to the document in question. This helps to streamline the communication between teams and greatly improves the efficiency.
Restricted Permissions: user access security during M&A due diligence is one of the essential features of the virtual data room. Administrator of due diligence virtual data room can restrict certain actions to certain user groups or individual users. They may be restricted to view certain documents — this comes handy at earlier stages of the deal — or they can be prevented from printing, copying or downloading certain documents. Always check virtual data room reviews to make sure that your chosen provider has this option.
Advanced Search: some of the most advanced due diligence data rooms search for words and phrases not just in PDF or Word documents but also in all file formats.
Today there is no shortage of best data rooms providers that offer an array of services and features to make your due diligence easier, so when you are choosing a virtual data room provider to host your deal, pick a partner who understands your requirements and structures its product and service offerings around these three critical rules. Top data room services such as iDeals Virtual Data Room not only offer a large set of features but can create a custom VDR for due diligence tool to meet your specific business requirements.
Selling your company or even some of its assets is a significant endeavor, and you naturally want to keep all corporate data confidential and at the same time please your potential buyers by presenting the data in a convenient manner. With best virtual data room providers it is finally possible, so do your homework and check virtual data room reviews before choosing a partner.