The use of Virtual Data Room technologies makes it possible to increase efficiency and expand the possibilities of information exchange. In this article more about it.
Due diligence – an independent evaluation of an investment object
Modern realities are characterized by increasing dynamics in doing business, where the main resource is the speed and completeness of the information. In today`s economic conditions, it becomes especially important for users of accounting (financial) statements to obtain accounting and analytical information not only about the current state but also about the predicted future of organizations. Assessing the financial future of a company is becoming the main task of modern professionals in the field of accounting, auditing, taxation, and an important issue for a potential investor. However, based on the auditor’s report, the investor can obtain only reasonable assurance about the appropriate accounting and fair presentation of accounting data in the financial statements. It is possible to help the investor independently and comprehensively assess the intended investment goal and the associated existing and potential risks using the due diligence procedure. The main task of this procedure is to objectively determine the real value of the enterprise, which is the object of analysis (target prices of the enterprise).
The need for due diligence arises in the following cases:
- in the process of making a decision on the admission of securities to quotation on the stock exchange (IPO);
- during the reorganization of enterprises;
- in the process of carrying out operations such as Mergers & Acquisition;
- in the process of rehabilitation of enterprises.
Deal flow tracking in a due diligence Data room
The prerequisite for successful implementation of due diligence is using a secure corporate information system. It is a system that supports the automation of control functions and provides information for deepening knowledge and acceptance management decisions. It implements a modern management ideology that combines business strategy enterprises and advanced information technologies. The corporate information system is an integral hardware-software complex that allows satisfying both operational and strategic needs of the enterprise in the data processing.
One of the types of a database for shared use is a Virtual Data Room, which is characterized by subject orientation, data integration, invariance over time, stability (immutability) of data, minimal loss of information. Providing distributed work and remote access is a mandatory requirement for corporate-level Data Rooms. So, such service should meet certain requirements:
- the use of client-server architecture with the possibility of using more industrial databases;
- organization of security through various methods of control and delimitation of access to information resources;
- support for distributed information processing;
- the modular principle of construction from software-independent functional blocks;
- the possibility of expansion through open standards.
How does it work?
Data rooms are a matter of course and standard today as part of due diligence. The benefit in terms of time and cost savings is very great on both the seller and the bidder side. In addition, the analysis and control options are invaluable for the seller, so that this cloud solution has established itself in the M&A area and has become an indispensable part of daily practice.
A virtual data room offers the highest possible protection when exchanging confidential data through data encryption during transmission and storage. In addition, particularly sensitive documents can be protected against download and with a watermark. Detailed access rights in the data room due diligence regulate which users can read, download or edit data. The administrators of a Data Room have full control over all processes via activity logs.