The Art of Due Diligence – Part 3

Best practises for classifying and producing due diligence materials

To answer each of the six key questions listed in the previous blog, a company preparing itself for a sale will need a substantial amount of documentation, all of which must be prepared in a way that will help due diligence reviewers determine as quickly and easily as possible the suitability of a deal.

At this point, making use of a convenient, secure and efficient virtual data room (VDR) for storage and review of documents can pay big dividends.

A VDR is a secure online document repository, accessed via the internet, which parties in any location can use to easily collaborate with each other and share information at any time during this pre-deal phase. A VDR also allows team members to efficiently collaborate in assembling, producing and verifying every document internally, before entering the due diligence phase.

An industry-leading VDR offers users a number of key benefits:

• It allows corporate team members to collect and present all relevant information in a secure, easy-to-use format. As a VDR serves as a virtual central document repository, users can avoid duplicating efforts or inadvertently working on the wrong version of a document. A VDR also keeps everyone focused inside one homogeneous platform to accomplish document collection.

• A VDR can greatly simplify coordinating pre-deal activities with expert advisors, including bankers and legal/ accounting/ HR experts, wherever they are located.

• Another benefit of using a VDR during the pre–deal phase is that internal team members can make use of pre-built indexes in the repository that are designed specifically to help users post the right types of information in the right way. In addition, quality VDRs offer expert consultants who can help a team implement a best-practice workflow as they gather, review and archive relevant information.

• As a VDR provides exceptional security for all information stored within the repository, users don’t need to worry about emails being leaked or mission-critical, confidential documents being accessed by potential hackers or malicious third parties.

• VDRs offer users a number of specific tools that benefit this early-stage document collection and review. A VDR makes it possible for internal team members to perform their own ‘due diligence’ on corporate documentation long before they open the flies to outside partners.

• Users can search quickly and easily across the entire VDR to locate documents based on keywords, which helps ensure they can review and vet information before it is presented to outside investors. Any problems or challenges can be identified and remedied at this stage, rather than in the heat and scrutiny of actual due diligence.

Conclusion

Companies contemplating an M&A event, such as a sale, need to understand the importance of preparing well in advance for the rigours due diligence will present.

Finding, reviewing and then producing corporate documentation is a time-intensive effort that can pay big dividends for companies that start audit, production and internal review early.

In addition, using simple yet advanced tools, such as a VDR, can help corporate management ensure they have prepared for and positioned their company in the very best light, which will contribute to a positive impact and a successful deal.

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