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Traditional VDRs Belong in a Museum: Digital M&A Platforms are Revolutionizing Due Diligence Productivity

A sophisticated buyer has hundreds – if not thousands - of questions and information requests in a due diligence phase of an M&A case. The process then includes asking the questions, getting answers to them, recording findings or issues, and requesting additional information until a satisfactory amount of information is collected.

 

For the lack of a better solution, buyers have typically used internally a big Excel spreadsheet to track all the questions, answers, and findings, and let the seller dominate the exchange by providing information as a batch of files via a virtual data room (VDR) document repository that is completely disconnected from the process.

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Anyone who has worked on a due diligence project knows that this disconnected and shared approach is a recipe for disaster. DD team members are trying to work with the same spreadsheet, versions get mixed up, documents provided by the seller are in no way linked to the questions they are supposed to clarify, and so on…

Smart buyers have scrapped the old Excel + VDR setup

Recently, thought-leading companies have turned this around. They, as buyers, have started to invite the seller to their own buy-side platform to answer due dilicenge questions and upload relevant documents.

A structured platform significantly reduces the buy-side team’s workload and provides them with right material in the right spots in the process. It is often much easier for the seller to produce material to order than for the seller to interpret existing material designed for other purposes.

Sellers, too, have praised the change for increased efficiency and enhanced collaboration between the parties, provided by the shared platform.

Very easy to set up and create a clear project plan

In Midaxo, each due diligence case has a dedicated workspace, shared by all parties. The buyer can control which questions are shown to the seller and which findings it chooses to disclose.

Existing Excel or Word-based due diligence questionnaires and information checklists can be imported with a few clicks.

Importing due diligence questionnaire to Midaxo makes it immediately structured, shared, assignable, and trackable.

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In practice, the buyer’s due diligence questionnaire is represented as a hierarchical task structure in Midaxo and the deal manager assigns questions to individual members of the acquisition team to work on.

The seller attaches the documents the buyer requested and writes relevant answers under each question. The parties can collaborate on additional information requests and further questions.

Collaboration around a due diligence question is efficient and documented:

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Real-time visibility to progress and findings

The due diligence project lead has real-time visibility to the progress made on answering questions. She can also analyze in real-time what the team is focusing and spending time on.

Due diligence progress view gives a execution status of the effort at the high level, with the capability to drill into every detail:

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Findings reported in a clear and actionable format

The due diligence end-product is a list of findings for the summary report and integration planning.

Detailed view of issues and risks identified in due diligence – and assigned to the later tasks that address them.

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What if the seller doesn’t want to let the buyer keep copies of the disclosed documents?

Many popular file-sharing services such as Google Docs enables you to share documents over the web and still disable downloading, printing, and copying of the files (read more here).

Disabling downloading, printing and saving in Google Docs:

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Instead of attaching the documents to buyer’s system, in Midaxo, the seller can attach links that point to the seller’s own file-sharing solution (e.g., Google, SharePoint, Dropbox). The documents are easily available to the buyer team as if they were uploaded, but naturally they can’t retain copies in case the acquisition is cancelled.

Attaching a link to a document (instead of uploading it):

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Quantum leap in due diligence productivity

The typical jigsaw of multiple separate tools for document sharing, communication, project coordination, etc. is replaced with a single integrated solution, accelerating the overall due diligence process.

Having both parties collaborating on the same platform brings the buyer’s and seller’s teams closer and deepens the communication. Naturally, the seller also saves the high cost of an expensive traditional virtual data room.

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