Mergers and acquisitions (M&A) are incredibly complex, and a variety of professionals have to be on board during the due diligence process. In the context of an M&A deal, due diligence refers to the review of all documents involved in the M&A transaction. This includes financial reports, legal documents, and anything else that could support the decision. While the CEOs of interested parties may support the idea of an M&A right away, there's still a need for bankers and other financial professionals, lawyers, and advisors to look over every document to ensure everything is in good shape. This can be extremely time-consuming, especially if team members aren't unified on a single platform. This is where a virtual data room comes in.
In decades past, it was fine to rely on physical data rooms, which were basically rooms housing cabinets filled with folders of confidential documents and other sensitive information. Large enterprises in the digital age, however, deal with more information than can be housed in a single room, thanks to big data. This led to the transition to data rooms like server warehouses, but even these may require too much upkeep these days. It's too risky for enterprises to share confidential information over typical cloud channels like Dropbox or Google Docs as well since you never know how secure a third-party connection is, and you can't control what happens to documents once they're downloaded. If you want to maintain security and control, then you'll need a due diligence data room. Here's how to make the best use of it.
Ensure all documents are digitized before they're needed.
It isn't unheard of for some large companies to still use paper-based sensitive documents for contract agreements, but this defeats the purpose of having a virtual data room (VDR). One of the greatest advantages of a due diligence VDR is the speed of document review. Having all the documents available in one place allows every professional involved to review what they need to review at their own pace, which can greatly accelerate the due diligence process.
Exercise full control over levels of access.
One of the greatest advantages of a VDR over a physical data room is that it's easier to control who actually has access to which documents. With templates for folders regarding each layer of due diligence, you can ensure that people only have access to what they need. For example, you can set up a folder with all the legal documents and make sure that only the lawyers on each side can access them.
You can even take things a step further with additional security features, like two-step authentication (2FA). As the name suggests, this is a security measure that requires more than one set of credentials to access necessary documents. This kind of security may require biometric information, such as facial recognition, in addition to a strong username and password. This ensures that the third parties on the other end are who they say they are, and it helps prevent information from falling into the wrong hands.
Take advantage of activity tracking.
Not only does a virtual data room allow you to control access, but it also lets you track information for each document, such as exactly when it's viewed and which users view it. You'll be able to tell if anyone downloads the documents as well. By assigning read-only access, you'll be able to prevent anyone from printing or duplicating a document without your permission.
Built-in digital rights management (DRM) features also mean that you can revoke access to documents at any time, even if they've been downloaded. This is extremely important at the end of an M&A to ensure your financial documents and other sensitive data can only be accessed by appropriate members within the enterprise.
