Data Room Due Diligence

You might have come across the term data room due diligence a couple of times. It is a popular term when selling or acquiring a business or building. Although a virtual data room for due diligence can be seen as a small part of the process, it is, nevertheless, a crucial aspect that could make or break your deal.

What is a Virtual Data Room?

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A virtual data room is an online repository to which colleagues and third parties can be given access. In this virtual environment users, depending on their roles and permissions, can access and engage data. When talking about a virtual data room for due diligence the same description can be given but its purpose is significantly different.

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Data room for due diligence

In a virtual data room for due diligence all data relevant for a merger or acquisition, such as financial and legal documents, are included. Once these due diligence data contents have been collected and uploaded in the data room, bidders and their advisers will be given access to the data room. These parties will look into the provided data room index due diligence and analyze it.

Why should you use a Virtual Data room Due Diligence

There are several reasons why a virtual data room due diligence is important. One of the reasons is to avoid claims and procedures. The data room records and reports every action of every buyer, this way it is clear which data has been accessed by users. Another important reason why you should make use of due diligence data room software is to guarantee security and privacy.

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Electronic data room due diligence & GDPR

You want to keep your valuable information out of the wrong hands, safe in your own data room and far away from unauthorized people, like hackers. Next to this, the GDPR requires you to take safety measures when sharing personal info. Therefore, it is crucial to work with third parties that are GDPR compliant, like due diligence data room providers.

How to use a Data room in due diligence

Using a data room can be very easy, depending on the due diligence data room tool you decide to work with. Once you have chosen the due diligence data room software, there are certain guidelines that you can follow to make the process more efficient. One of these guidelines concerns the design of your data room in terms of the uploaded index. You want to keep your data room due diligence structure and communication stream within the data room clean and clear. For advice on how you should organize your data room: let us help you.

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Frequently asked questions

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  • An online repository that people can access via the Internet and in which they can engage data. Depending on roles and permissions, data room users can access documents within the online secure environment. As an owner of the data room you make up the rules and are able to see exactly who accessed which document.

  • You can set-up very easily via the Internet. If you want to open a data room you can directly upload your own existing folder structure in the online environment. Once you have uploaded it in the data room you can design roles and permission in which you invite external parties.

  • Comparing a data room to Dropbox is like comparing apples and oranges. A data room is a much more advanced environment with many in depth features. However, for secure filesharing, some businesses decide to use Dropbox to share their internal documentation with colleagues. This is a less expensive option, however also a less secure option. Therefore, many businesses make the switch from Dropbox to a data room these (cybercrime) days.

  • A data room due diligence is an online environment to which a seller gives its advisers and potential buyers access. The seller can upload, together with its advisers, the due diligence contents in the virtual environment. Confidentiality can be kept via the different designed roles and permissions for each buyer group. The seller knows exactly which buyer has seen which document, this way claims and procedures can be avoided.

  • Many businesses make use of a data room due diligence checklist when setting up and organizing their data room. Although no clear data room due diligence rules exists there are certain guidelines that can definitely fasten the process. The way you split your buy and sell side can be very important for your process. You want to implement a clear data room due diligence structure as well, one with which buyers can easily work.