A due diligence data room is a type of virtual data room (VDR), which is a virtual space that can be used to store and share important documents. These virtual data rooms have been replacing physical data rooms for large enterprises in the modern age of big data and digital transformations. This is because there’s simply too much information to conveniently store in and retrieve from physical data rooms these days.
A VDR is also a more secure option, which is extremely important for the due diligence process. Due diligence is the process of investigating and verifying various deal opportunities and is an extremely important part of any merger or acquisition (M&A). Interested parties must go through potentially thousands of pages of confidential documents and sensitive information, such as financial statements and legal documents, to ensure the deal is in the best interests of everyone. A due diligence data room, also known as a deal room, is your best bet for keeping such documents safe, but how do you know how to choose the right one? Here are five things to look out for.
1. Built-In DRM
You may be familiar with digital rights management (DRM) as a way for creators to protect their intellectual property, but it’s actually becoming a standard for protecting sensitive documents as well. A due diligence data room equipped with DRM gives you the ability to easily control who can view, download, and edit your documents. Simply upload your documents to the platform and click “enable DRM” to control which third parties will have access to the documents.
2. Customized Permissions
In addition to letting you set levels of access for individuals, the best VDR providers will let you set permissions for user groups. For example, if there are multiple accountants on each side of the deal who need to gather insights from all the financial documents, you can create a user group for them and grant them all access to those documents. It’s also a good idea to look for a platform that will let you immediately rescind access to documents, even after they’ve been downloaded, to make sure they don’t fall into the wrong hands.
3. Enterprise Security Levels
In addition to DRM, it’s a good idea to look for a data room that protects your sensitive data with encryption and that verifies your documents with watermarking. High security and document management like this are what separates a true enterprise solution from traditional file-sharing options.
If you rely on typical file-sharing options like Google Drive or Dropbox, interested parties will have to download their required documents before viewing them. This opens you up to all of the security vulnerabilities on every device that third parties are using, and it greatly increases your chances of a data breach. Keeping everything on the platform is the best way to ensure your corporate documents are kept secure. You should also look for due diligence software that lets you add further security measures if you want, such as multi-factor authentication to ensure new users are really who they say they are.
4. Document Tracking
Look for a virtual data room provider who gives you real-time activity tracking abilities for all of your documents. You’re trying to get deals done as quickly as possible, after all, so it makes sense that you should be able to track what users are doing with your documents in order to estimate timetables for different projects. If a group of users isn’t accessing your documents as quickly as the others, that could be a sign that they aren’t as interested in the deal.
Activity tracking can also clue you in if a particular user is struggling with their documents. You can direct them to the points that need the most attention to help move things along.
5. On Platform Notation
Speaking of checking up on documents, every user with access to their necessary documents should be able to make notations, comments, or ask questions directly on the document within your platform. This greatly simplifies communications, and with no need for plugins or downloads, you can be assured that your documents are in a secure space.
