What is Due Diligence?
Due diligence is the process of examining and analyzing a company, project or selected area that has been designated for this. Most often, the due diligence process concerns a company that is subject to, for example:
· acquisition or merger transactions with another entity (M&A),
· searching for an investor and recapitalization of the company,
· seeking financing in the form of a loan or bond issue,
· listing of the company on the stock exchange or obtaining additional capital from the capital market (IPO / SPO)
· restructuring or conversion process.
The most common areas that make up this comprehensive study include:
Financial analysis - that is, verification of financial statements and projections
Legal and tax analysis - including the analysis of legal and tax requirements and aspects of the business
Technical or technological analysis - including the analysis of technological and technical aspects related to the conducted activity
Market analysis - the so-called Commercial Due Diligence, assessing the market potential of the activity
Environmental analysis - aspects related to the environmental impact of the activities carried out
The main purpose of conducting due diligence is to collect comprehensive and objective information necessary to evaluate the company's value and identify risk factors having a significant impact on it.
What does the due diligence process look like?
Due diligence is usually tedious and time-consuming work of several teams of advisers, whose task is to review documentation related to individual audit areas as well as interviews and talks with key people in the company. It is a process that must be properly prepared by advisors (scope of due diligence), as well as properly prepared by the company (providing documents and data). At the same time, the due diligence process should ensure adequate communication between the company and advisors and impose certain work discipline determined by the schedule.
A very important aspect of due diligence is the confidentiality of the entire process and ensuring adequate security of the data and documents provided. This is especially important in processes where some or all of trade secrets are disclosed that have a significant impact on the position and market advantage. Ensuring adequate control and monitoring of events in the due diligence process is one of the key aspects ensuring confidentiality, security and proper supervision of the process.
Historically, due diligence was done in the traditional way - documents, data and access to key personnel were in the physical data room. Such practices are a thing of the past and most of this type of research is done virtually.
Why is it worth using Virtual Data Room for due diligence?
Many aspects of our work are more and more carried out remotely. Digitization of processes and technological progress make it possible to organize the work environment independently of its place (office, home) or the tools used (business or private computer). In addition, there are recent rapid changes caused by COVID19 and the rapid implementation of the so-called remote work.
Virtual Data Room is an excellent example of a unique remote work environment for the needs of selected projects, e.g. due diligence process. For years, systems of this type have ensured the possibility of remote work, adequate security of access and authorizations, adequate security of data and documents, confidential communication and detailed monitoring of events and activities in the system.
Virtual Data Room can be launched for the needs of a due diligence project in a few minutes and prepare such a process in an extremely efficient and intuitive way together with an advisor and company. Preparing the system for work, inviting the administrator, people managing the due diligence process and users, entering documents and granting appropriate permissions is often possible within a few hours of starting work on the project.
Due diligence is always teamwork. Advisors often analyze selected issues together, comment on them and ask questions to the company. VDR should provide the opportunity to work together in groups, comment on documents and ask questions in the form of advanced Q&A.
The end result, apart from the analysis, is very often the possibility of archiving the entire Virtual Data Room - both documents and all activities. The due diligence process in selected VDR systems can be completed with the so-called "White VDR Book", which is a record of all data and activities on a given project. It can be important for issues that will relate to historical due diligence in the future.
The appropriate provider of the Virtual Data Room service should provide adequate support at every stage of the project, 24/7 availability of the service, as well as the speed and intuitiveness of the system ensuring the comfort of the due diligence work.
Why is it worth choosing VDR SECUDO for the due diligence process?
Virtual Data Room SECUDO is a tool tailored to modern due diligence processes. Security, speed and advanced functionalities of the SECUDO VDR system guarantee professional and trouble-free handling of complex and demanding due diligence processes. For many years we have been professionally supporting international projects and processes of our clients from all over the world. More information about VDR SECUDO can be found on our product website: secudosolutions.com.
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