With Arrival of the Coronavirus pandemic in 2020 forced a lot of small and big corporates houses to operate remotely. Despite the pandemic, the Deal making is rising in times of Pandemic reported by a wall street journal. Global companies have signed deals of more the 1 trillion which is way more than 2019 which was at $763 billion.
How are companies managing M&A forward in these times? Technology is the biggest factor that has to fasten up the process of due diligence in a remote environment, but there are more reasons than this we would cover this in this article and how we can streamline our process for Conducting remote due diligence.
Use of Right Technology:
For years Virtual Data Room is solving the problem of Due diligence for Legal and financial teams, allowing users to share confidential data with other companies. According to the wall street journal Virtual Data rooms is become more vital these days to verify and assess financial records and documents for any successful deal-making.
But now in personal meetings and sites visits are not always possible, more technological advancement is required so that operational and environmental due diligence can be done without any hassle and difficulty and can be done remotely. Corporates are using video conference tools like Zoom, Google meets, etc.
Video conferencing tools have also helped face-to-face interaction which is pivotal for any due diligence process to enable trust among the business partners, especially when millions of dollars are at stake. By planning regular meetings, all parties should feel confident about the opportunity to work together.
Getting ready for Longer Due Diligence Periods
Due diligence is already a very lengthy process when conducted in person, and obviously for good reason. All the parties should feel confident about each other and the proposed deal should make sense, and the other party is providing an honest characterization of their business.
During Due Diligence you should adjust your expectations and allocate enough time to remote due diligence. With technology, it is rare for any transaction to be smooth like in person due to various issues like user errors, connectivity issues, and video call fatigue, etc especially for the business who are new to the technology.
As per the American bar association article, it has become more common among buyers who require additional time for due diligence earlier exclusivity periods were around 60 days which have become 90 to 120 days. Sellers would also experience more scrutiny from buyers who want to see how their business model is responding in these times which extends the whole process as more information needs to be exchanged and reviewed.
Confidentiality Issues
Data Security and privacy issues increase in remote due diligence. All members in internal teams need to understand the urgency and internal confidentiality policies and will only share sensitive data only when necessary. And while you should invest in technology solutions that prioritize security. Develop policy and procedures for sharing confidential information which helps your company data getting into the wrong hands.
FirmsData: Virtual Data rooms come equipped with security features like two-factor authentication, document Watermarking, audit logs, permission-based roles, and auto shredding. All these features will help you to remain in control of the file sharing process and minimize the fallout if any document is shared with an unrequired user.
Connecting With the Right People
Connecting and meeting with your would-be partners is important during the remote Due diligence particularly when you have not met personally. However, some businesses that are already familiar with each other will reduce the pandemic impact while many businesses are meeting for the first time.
Reaching out to your professional and personal network like Founders, VCs, co-investors, etc. It can help you to achieve goals faster. These connections can also verify company reputation and reduce the chances of fall through. In absence of such liaison, such works can also be done by lawyers, M&A experts to take care of due Diligence.
The key contributors in a deal should communicate more often, including video meetings when possible. The meetings should have predefined agendas like updates, Risk evaluation matrix, progress track charts, etc.
Having an organized meeting will allow and ensures all participants will share their information and concerns efficiently and frequently. Since holding the virtual meeting lowers the barrier and more participants can join and every agenda can be discussed and things can be on time.
It is also possible that you will spend a lot of time on these meetings during remote due diligence especially if you are not aware of others’ business. This may also lead to repeated meetings with key players of product demos, and other informal discussions to get to know others involved.
Communicate Often With Key Stakeholders
Transparent, Truthful, and frequent discussion among stakeholders is very important in remote due diligence. Because doing business remotely is different from normal business-like face-to-face, queries and concerns should be answered promptly to reduce risk.
Specifically, prompt touch bases with relevant stakeholders will safeguard any organization to go on the wrong path in an M&A deal. Be especially careful how building models and running analyses are performing during economic turbulence, separating temporary hurdles but identifying deep structural problems.
Conclusions:
Although remote due diligence is more challenging than face-to-face transactions. The deal makers and technology have solved this problem with the help of Virtual Data Room and the process has become more transparent, proficient, and trustworthy.
FirmsData: Virtual Data Rooms make it easy to organize remote due diligence and can be set up only in 10 minutes. Plans are divided into two parts with or without DRM (Digital Rights Management). Start your free trial to start setting up your data room now.
