How Virtual data rooms play a critical role in the process of Due Diligence

A virtual data room can be handy for various transactions in large companies. Even preparing for a transaction is not complete without this convenient and relatively inexpensive tool. The Due Diligence procedure, for example, is quickly performed using VDR technology.

What is Due Diligence

Due diligence (comprehensive legal assessment) is a procedure for a thorough independent evaluation of a company initiated by an investor who plans to enter the authorized capital or an owner who wants to receive an expert assessment of assets and an analysis of the correctness of financial reporting.

Types of due diligence

Although conditionally, several types of due diligence can be distinguished: technical, marketing, environmental, legal, economic, tax, etc.

For example, environmental due diligence involves checking compliance with the procedure for using subsoil, land, water, atmospheric air, and other resources that make up the natural environment.

Technical due diligence may consist in checking design, including technical documentation. In addition, much attention is paid to budget documentation. When preparing construction documentation, it is customary to pay special attention to checking the working draft of engineering communications.

Marketing due diligence includes studying a system of measures aimed at coordinating production with the market situation and ensuring sustainable sales; product, pricing and communication policy, product promotion systems, personnel management, etc.

Economic due diligence includes all material aspects of activity: the economic and property condition, the position in the financial sector, the state of monetary settlements, etc.

Tax and fiscal due diligence are often carried out as part of an economic study in the particular financial.

Benefits of data rooms for due diligence

Companies that know about VDR – what it is, how it works, and what advantages it has, are faced with choosing the right solution for their tasks. There are several points to which you need to pay attention.

Flexible scaling

A VDR must support scaling as the business grows. The rapid development of technology leads to new platforms and protocols. They may be rarely used today, but things could change drastically in a few months. The same applies to support for system and application software that will be deployed on the user side. In other words, the more communication methods a VDR supports, the longer it will function in its original configuration.

Smart tool support

These are typical features for most modern VDRs and are needed to simplify the operation of the room as much as possible. The most striking examples are user authentication, accounting for the resources used, and the preparation of automated billing statements. When choosing functionality, it is enough to come to a reasonable compromise: such tools should not become an end for the company’s IT department but should fulfill its business tasks.

Easy to install and maintain

This will remove some of the responsibilities from the company’s system administrators and will reduce the number of staff positions required to maintain the VDR. In addition, difficult moments should become transparent and understandable so that specialists with basic qualifications can work with them.

Reliability and performance

They depend on the software used and the stability of the communication channel through which the room and workstations communicate. The higher the bandwidth of the communication channel and the more reliable the selected Internet provider, the better.