According to Gartner, Inc., some of the leading M&A due diligence trends in 2024 will be unlocking technology opportunities, navigating complex regulatory environments, and using artificial intelligence to improve merger and acquisition processes. And since M&A is a growth engine for many business leaders, your success largely depends on following these trends.
In our post, you can learn about a virtual data room due diligence as one of the most sought-after solutions for M&A due diligence across industries. Moreover, we will tell you about all the software benefits for data security, compliance, and other aspects of the due diligence procedure.
What is a data room?
A virtual data room is an online platform for due diligence that allows authorized users to safely store, share, and access corporate documents from anywhere in the world. It includes highly secure cloud storage, protected channels for file sharing, multiple collaboration tools, as well as task- and user-management features.
Companies across industries use a virtual data room for restructuring and administration, due diligence, M&A, board communications, strategic partnerships, capital raising, etc.
There’s also a virtual data room for startups for secure and efficient storage, management, and sharing of startup documents during fundraising and investment due diligence.
Interesting fact! Pioneer data room developers created the product with due diligence in mind since physical data rooms, hard drives, and memory cards made the process longer and more complex.
Now, we invite you to check what an online data room has for due diligence!
What are data room benefits for due diligence?
Not by compliance alone!
As is known, a fundamental goal of due diligence is to share documents complying with regulations and without compromising security. At the same time, multiple parties with different roles and privileges need easy data access. Fortunately, VDR providers offer unmatched security, strict compliance, access controls, and ease of use, all rolled into one.
Specifically, data room software offers the following benefits.
To ensure your due diligence follows international rules and regulations, the best data rooms adhere to the following compliance:
- ISO/IEC 27001 signifies adherence to an international standard for information security management systems, ensuring robust controls and safeguards for protecting sensitive data.
- SOC 1 assures that a service organization’s controls related to financial reporting are reliable, providing confidence to user entities regarding the integrity of financial information.
- SOC 2 indicates adherence to a framework tailored for technology organizations, evaluating security, availability, processing integrity, confidentiality, and privacy controls.
- SOC 3 provides a summarized assurance report on a service organization’s adherence to the Trust Service Criteria, emphasizing security, availability, processing integrity, confidentiality, and privacy.
- GDPR ensures adherence to European data protection regulations, focusing on transparency, user rights, and accountability in processing personal data during due diligence.
- HIPAA signifies adherence to standards for protecting healthcare information, ensuring the secure handling and confidentiality of protected health information during the procedure.
- FINRA denotes adherence to regulations governing broker-dealers, ensuring that the due diligence process aligns with the standards and requirements set forth by the financial industry regulatory body.
Virtual data rooms became the industry’s best at protecting corporate documents thanks to the following data protection mechanisms:
- Physical data protection. Reliable vendors use highly secure data centers with strict access policies, physical security measures, and access to uninterruptible power.
- Real-time data backup. This feature maintains the integrity and security of due diligence documents in case of system failures, human errors, cybersecurity incidents, or other emergencies.
- Multi-layered data encryption. Advanced providers typically encrypt data at rest and in transit using 256-bit AES keys. In simple terms, the software makes a document unreadable to unauthorized persons, whether in storage or transmission.
- Two-step verification. To access data rooms, users need a password and a one-time code generated by the software and sent to their phone.
- Access permissions. You can configure data access based on the due diligence participants’ roles. For example, while a document is available to an adviser, it may not be available to an investor. It ensures secure and consistent data sharing as the transaction progresses.
- Dynamic watermarks. Custom watermarks can contain the user’s name, IP address, access time and date. This information helps you quickly identify the source of the leak in case of a data breach.
3. Ease of use
Finally, we invite you to ensure that the software strikes a balance between complex security mechanisms and ease of use. The features that make data rooms user-friendly are as follows:
- Single sign-on. Users receive a single login and password for all projects (without security risks). Therefore, you no longer have to remember your passwords and project names.
- Drag-and-drop bulk upload. Since due diligence involves hundreds of documents, virtual data room providers have made it possible to upload any number of files of any size with just a few clicks.
- Full-text search. You can find the file you need in seconds by entering a keyword. Moreover, some solutions have OCR search, allowing you to convert PDFs into searchable documents.
- Automatic index numbering. No matter how many files or folders you upload, a data room automatically numbers them. This way, you get an organized document tree that stays organized even when you delete or add new items.
As you can see, a virtual data room provides a secure and feature-rich environment for due diligence. And being created specifically for this procedure, the software has no competitors.
Since our post only covers some of the basic data room features, we recommend browsing providers and learning more about their services, as they may vary. Also, check virtual data room reviews to choose the best fit!