Sharing Files During Due Diligence: Best Practices

Sharing Files During Due Diligence

Due Diligence is a definition that originates from the realm of business transactions. In fact, this is a whole complex of checks carried out before concluding a contract aimed at obtaining reliable data on the intricacies of the process.

The Best Ways and Practices for Sharing Files During Due Diligence

In recent years, standardization processes have increasingly affected such areas of activity that are non-traditional for the system of standardization objects, such as accounting and due diligence. At the same time, closer attention should be paid to the analytical processes and procedures that are carried out by decision-makers in different economic entities.

Look at any M&A due diligence checklist, and you’ll see the same thing everywhere:

  • financial documents;
  • customer information;
  • sales;
  • real estate;
  • intellectual-property;
  • contracts, and so on.

Only one item is missing – information security, which can be a fatal mistake. The value of standardization can hardly be overestimated, especially in the era of digitalization, when it is possible to divide tasks into unified, highly automated, and atypical, creative ones. Standardization, therefore, acts as a tool for managerial innovation, offering to start with the introduction of simplified, standardized procedures, stabilize and improve business processes, releasing people’s energy to solve creative problems and generate new ideas.

Like any other essential component of business management, security should be at the top of the M&A due diligence list. When two companies merge, it often turns out that their systems and data structure are different or even incompatible, which hackers are sure to take advantage of. In order for your transaction to succeed, you need to think about security in time.

Do Not Neglect Security When Conducting Due Diligence Transactions

Entrepreneurship, by its very nature, is high-risk. But it would be strange if businessmen did not strive to prevent and minimize risks, especially when it comes to a large investment or transaction. In business practice, this is called the exercise of “due diligence” or Due Diligence. If for a particular program or information system, the results indicate a need for more precise recommendations, then a more detailed review, using careful quantitative analysis, may be recommended to determine what security countermeasures should be taken or to evaluate possible alternatives.

It is highly recommended to use the best practices for sharing due diligence for:

  1. Confirmation of the title of the current owner of the object.
  2. Verification of rights to the main assets of the project.
  3. Verification of compliance with the main requirements of the legislation, including those related to the implementation of the regulated type of activity.
  4. Analysis of the risks associated with the change of control in relation to the object.
  5. Analysis of risks associated with the presentation of claims for early fulfillment of financial obligations.
  6. Analysis of employment contracts for the presence of “golden parachutes.”
  7. Identification of material litigation.

It should be noted that electronic documents must be stored in electronic form and not in printed form. Printing should be carried out only at the request of the inspectors. As a rule, sharing files during due diligence best practices solve the following tasks:

  • document management – export, import, version control, security, and access control;
  • management of document templates – the unification of documents used in corporate workflow;
  • archive management – long-term archiving, including the automation of retention policies in accordance with business objectives, with legislative and industry standards.