In business parlance, due diligence is the research and analysis of a company or organization that is done while preparing for a business transaction, such as a potential acquisition, where in the intending acquirer evaluates a target company and its assets.
Such due diligence requires access to highly confidential information from multiple parties. Before technological advances, companies wouldn’t let their confidential information leave their premises so the interested parties had to physically travel to scrutinize all the documents. Since due diligence is a long drawn process, they were required to travel multiple times. Now, with modern cloud technology, all the requisite data is uploaded into the cloud, where authorized teams have access to it. Cloud storage has made due diligence more safe, efficient, and affordable. Teams have the ability to set permissions, securely share documents, and communicate.
The goal of due diligence is to evaluate a business from all aspects prior to making a purchase decision. It is not a general investigation, but it is customized to the specific needs and elements of the deal and the businesses involved. Due diligence protects both parties, especially the purchaser. Often, it is during due diligence where potential liabilities are uncovered. And data rooms provide a safe place for this information to be gathered and accessed.
An informed decision is the best decision. Due diligence data room adds value by evaluating the benefits, costs, and risks associated with an upcoming decision. Due diligence has now become a standard practice that serves two goals: it makes sure that there is complete transparency in the financial statements so investors can make informed, well calculated decisions, and secondly create laws against fraud and misrepresentation in the securities market.
The advantages of using a data room for due diligence are manifold:
It offers high level of security to all stake holders: Most modern data rooms offer bank grade security.
It has the capacity to organize and securely send hundreds of sensitive documents with complete compliance and security assurances: Most VDR meet the following widely recognized data security standards:
- 256-bit AES end-to-end data encryption
- ISO-27001 (digital asset security standard)
- HIPAA compliance
Capacity for handling unlimited recipients and rooms: some VDR solutions go further and allow you to create and handle multiple (and even unlimited) data rooms from a single account.
Easy file management: The drag and drop file upload technology allows easy file management with:
- Built-in file viewer: Built-in Excel and document viewer gives users file visibility, without ever having to leave the data room software.
- In-document search: Quickly search and find the files you need inside your data room with smart full-text search feature.
- Indexing features: Easily access the entire virtual data room, which users can rearrange with drag-and-drop, renumber, and export to PDF or Excel.
Powerful access control: VDR’s access controls have the flexibility and allows you to automate the access controls by having the capacity to easily and instantly grant or revoke access at the individual or role-based level.
Activity Tracking & Analytics: Data rooms have the ability to track team members logging on and off, how much time was spent viewing a document and which document was viewed the most. This enables you to see which documents your client viewed the most and helps you to figure out what is most important to them. Tracking features also helps management get an overview of what team members are working on, and the status on their projects.
Q&A/Requests Management: The Q&A feature facilitates users to ask questions regarding the folders and documents they have been given access to, without leaving the platform. Whenever a question is asked, an email alert is sent out, and the query can be answered via email or through the Q&A tab. All buyer document requests and communication regarding the due diligence process can go through the data room. Everything is updated in real time, so users no longer need to worry about version control. Teams can upload pre-made templates, and the room will automatically populate with the diligence requests. From there, users can request files, documents, and tasks from specific users. Within each request, users can add attachments, set due dates, write comments, ask questions, and more. They can mark the status of the request.
Advanced features
Access control, secure hosting and end-to-end data encryption serve as the non-negotiable backbone of any virtual data room solution. Other advanced features a professional-grade VDR offers include easy bulk-uploading/importing; customizable watermarking; and a built-in NDA.
By choosing a reputed virtual deal room with due diligence in mind, parties to a merger, acquisition or other transaction can balance efficiency and data protection. A right data room like DocullyVDR can help parties meet their due diligence requirements with tools and protocols designed for today’s digital world.
The DocullyVDR team is a provider of a new generation secure data sharing platform designed for businesses. The team has extensive experience in working with document sharing platforms and has been assisting the Virtual Data Room community since 2019 by providing users with free information.