When carrying out business, any company wants to be sure of the reliability and profitability of the deal. For this purpose, the Virtual Data Room Due Diligence Checklist has been provided.
Due Diligence: why do you need a Data Room?
Currently, business representatives are striving to expand their sphere of influence, carrying out transactions for the purchase of companies and enterprises, for the acquisition of other assets, for direct investment. There is a clear trend towards mergers and acquisitions. This process involves not only transnational companies but also national and regional companies. But before acquiring a new business, it is necessary to accurately assess its objective value, check whether it has assets and liabilities, and make sure how profitable the operation is. The main question facing every investor and buyer is how not to be deceived, how to minimize the risks associated with the upcoming transaction. In this case, a special procedure is required for the prior collection of independent information, such as the Due Diligence procedure.
Due diligence procedure necessarily involves the disclosure of information about the company by the seller to a potential investor. The most common difficulty in carrying out the procedure is the company’s limited ability to provide all the necessary information. The degree of this limitation depends on the availability and practice of using information systems and the organization of document flow. Information for analysis is provided not only by the participants in the transaction but is also taken from independent and most diverse sources. At the same time, a situation often arises when the seller (recipient of funds, invested company, etc.) is not interested in disclosing all the requested documentation and information, realizing that some real materials can greatly reduce the transaction price. That is, the owners of the business being sold can deliberately restrict access to certain types of information. To prevent this situation, it is advisable to preliminarily agree on the list of documents to be analyzed.
It is very important to secure the obligation of the investigated object to facilitate the examination and guarantee access to personnel, documents, office space.
On the other hand, sellers are afraid of leakage and dissemination of verifiable information and try to maintain confidentiality. Since the dissemination of some information about the seller (invested object) entails certain risks. Since in the process of obtaining such information, vulnerabilities are identified that can be used by raiders to seize the company. Besides, the analysis is based on regulations, internal and external information, data provided by partners and competitors. Therefore, it is important to ensure a secure repository for confidential data storing and exchanging. In this case, Virtual Data Room would be a great option.
What is Data Room Due Diligence Checklist?
The procedure is based on the collection and analysis of information about changes in the external and internal environment of the company. Data Room Due Diligence Checklist includes a detailed analysis of the following aspects of the company’s activities:
- the legal status of the company;
- corporate management systems;
- organizational structure;
- management qualifications;
- information about labor resources;
- data on the production resources of the company;
- obstacles in the implementation of economic and economic activities;
- information about the properties of the industry;
- the volume of accounts payable and receivable;
- information about the company’s financial investments;
- customer relationship marketing;
- information about the company’s reserves: composition, cost, dynamics, illiquid assets.