Due diligence is a crucial step in investment transactions or mergers and acquisitions. This process verifies financial and other data relevant to the transaction to guarantee the security of both parties. During the due diligence, the company must give the inspectors access to confidential information while maintaining its integrity and providing potential partners with a comfortable working environment. This can be accomplished with the help of virtual data rooms. In this article, you will learn how VDRs are useful during due diligence.
What are virtual data rooms for due diligence?
In the past, to perform long and complex due diligence, experts had to come to a designated location for this operation, namely physical data rooms. If the potential acquiring company was in another city or country, they had to settle into temporary housing like a hotel or rental apartment for a while until the due diligence was done. With the traditional process, due diligence could take a minimum of 3 months, and the physical data room was only available during fixed office hours.
With the advent of the virtual data room, the due diligence process has been greatly improved and streamlined, as the VDR is a robust online space that stores important sensitive information. The platform allows you to create multiple virtual rooms where you can store information for specific due diligence or simply to keep your data secure. In addition, VDR administrators can invite temporary users, i.e., due diligence experts, into the space; therefore, they can perform verification remotely and from any device.
The Benefits of Using VDRs for Due Diligence
Many companies around the world use VDR solutions as they can speed up the due diligence process, increase company productivity and streamline routine processes. The best data rooms provide their customers with these benefits:
- High data security
VDR software has international security licenses, which prove its professionalism towards business. Compared to physical data rooms, in the VDR space, administrators have full control over any processes, and therefore the chances of data leakage are equaled to zero. Furthermore, data rooms use advanced security technologies that provide multiple layers of protection, such as data encryption, dual authentication, activity tracking, watermarking, and granular permissions. The latter feature allows flexibility to regulate other users’ access to documents and prohibits copying, printing, editing, forwarding, downloading, and screenshotting.
The Virtual Data Room significantly saves time for both parties to the transaction. In addition, it increases their mobility, as authorized users can log in to VDRs from any device or location, regardless of time. Inside the program, all the tools to complete a transaction, even an electronic signature, so you don’t have to travel to the office to sign an NDA or any other document. VDR also provides convenient file management tools so that companies can guarantee an organized and transparent folder system.
- Easy to use
Even though we live in the digital age, users will have varying levels of computer proficiency when they encounter the data room. In the case of due diligence, the easier it is to work with documents, the faster the transaction will move forward, which is why VDRs offer an intuitive interface and transparent tools for working with documents. Experts can use smart search to find the document they need and a viewer feature that allows you to view documents more efficiently in a single folder.