Top 6 Things You Need to Know About Due Diligence Data Rooms

Last updated on September 21, 2021

The due diligence process is, basically, an investigation conducted by a variety of business professionals to confirm facts regarding matters under consideration. Due diligence is especially common during the mergers and acquisitions (M&A) process. In an M&A transaction, two companies may merge into one, or they may consolidate their assets in some other way. While the two CEOs may agree to the idea at face value, it takes a team of professionals like investment bankers, lawyers, and other advisors to ensure the deal is truly in everyone’s best interests.

While large enterprises may have relied on physical data rooms in the past, in a world of big data and digital transformations, it just isn’t that feasible anymore. Businesses are relying more on cloud solutions and virtual data rooms (VDRs) to store and distribute folders of confidential documents. Documents like financial reports, legal forms, and other sensitive information must be reviewed before committing to any M&A deal, and a virtual data room is the best way to make it happen. Here are six things you’ll need to know about a due diligence data room.

1. A data room speeds up transactions.

One of the best advantages of a VDR is that it speeds up the review of financial statements and sensitive documents regarding operational processes for all interested parties. Having one solution with a convenient dashboard makes it easy for everyone involved to get the documents they need as soon as possible, so they can fact-check every aspect of the deal.

2. You can control levels of access.

Of course, not everyone involved in the due diligence process needs access to the same documents. Attorneys, for example, probably don’t need access to details about all business processes, so they’ll have a different level of access from the people who do. You’ll be able to set up keys for decryption based on what confidential information each third party needs, and you could even set multi-factor authentication to ensure that each person accessing a document is who they claim to be.

3. You can revoke access at any time.

While authorizing access in a virtual data room is important, it’s even more important that you protect your sensitive data after a deal is complete. Fortunately, the best virtual data room providers give you the ability to revoke access to files at any time, even if the user has already downloaded them. This ensures that no one keeps corporate documents after the fact, and you can even set time limits for users to download documents to ensure they’re viewed in a timely manner.

4. You can track activity in real-time.

Thanks to advanced analytics, you’ll even be able to see who accesses required documents in your virtual data room and when. You’ll have time stamps for downloads, as well as each view, so you can more accurately gauge which parties are interested and the overall pace of the deal. These insights can be useful for follow-ups and for smoothing friction between parties in the deal room.

5. You’ll have built-in IT support.

While computers and web browsers can push updates at inconvenient times that grind the workflow to a halt, you won’t have to worry about this with virtual data rooms. Your VDR provider will handle all upgrades, including security updates, as they’re needed without disrupting your activities. You’ll also never need to download any plugins to view documents in a VDR.

6. You can customize VDR technology to your needs.

Virtual data room software is protected through digital rights management (DRM) that encrypts and safeguards all of your due diligence documents. This DRM software can also be integrated with existing enterprise systems, or you can even create custom solutions using the technology. No matter what you need from an online data room, a virtual data room provider can see to it that you get everything you need from data room software.