Tue, 28 Sep 2021

How to Use A Data Room to Maximize Your Due Diligence

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30 Jul 2021, 20:24 GMT+10

Due diligence is an investigation or audit meant to confirm facts regarding matters under consideration. The due diligence process may be performed during fundraising when purchasing real estate, or during legal matters, but it's most commonly conducted during mergers and acquisitions (M&A). An M&A transaction often involves the merger of two companies or the sale of one to another, but it may involve consolidating assets in other ways. Regardless, an M&A deal always requires attorneys, investment bankers, and other advisors to go over confidential documents to make sure the deal is in their party's best interests.

Naturally, you'll want to make sure that any sensitive documents you submit are protected. Data is one of the most powerful assets that any organization has, after all, and in a world of big data and digital transformations, it just isn't feasible to try and store all documents in a physical data room anymore. These days, large enterprises are relying more on cloud solutions and virtual data rooms to secure confidential information. When it comes to enterprise file sharing, you'll want a more secure solution than traditional options like Dropbox and Google Drive. Here's how you can use a due diligence data room to keep your data secure and make the entire M&A process go more smoothly.

Virtual data rooms provide everything in one location.

One of the best advantages of a VDR is that it gives all parties one location where they can access all the appropriate folders and documents for an ongoing deal. So long as a user has the right permission, they can download and view shared documents on any device, so they can review them at their own pace and generally speed up the process.

You have complete control over access.

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Not everyone involved in due diligence needs to access every document in the data room. A financial advisor, for example, will need to see financial statements, but it's unlikely they'd have any reason to view legal documents. You can use your online data room to set the appropriate levels of access for each party. You'll be in control of the encryption key delivery to each user, and you can even set up multi-factor authentication for additional control.

You'll also be in control of exactly how long each party has to access and review their respective documents. You can revoke access rights at any time, even if a user has already downloaded the document. It's always a smart idea to revoke access for all interested parties once due diligence is complete, but there are other ways you can use these controls. For instance, you could set up a time limit for the initial download of each document to ensure that all dealmakers access their required documents in a timely manner.

Tracking and analysis tools let you control the pace of due diligence.

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In addition to being able to control access to corporate documents, real-time analytics also lets you monitor who accesses which documents and when they do so. You can see when documents are downloaded in the first place, as well as each time they're viewed or edited on the platform. This makes it easy to tell which parties are interested in the deal and which may have issues.

If you see that someone in the data room is going through their documents at a slower pace than the rest of the team, you may be able to direct them to the most crucial points for review. Some of these documents can be hundreds, or even thousands, of pages long, so you'll need every tool you can get to speed up processes.

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