In a white paper, Drooms, a virtual data room (VDR) provider, outlines the five steps corporates need to take to run an efficient, automated Q&A-led due diligence process.
In the publication, entitled ‘Five Steps to a Smooth Q&A Process for Transactions’, Drooms notes that due diligence has become more important than ever due to the growing global trend for post-acquisition lawsuits. In 2012, 96% of all US public merger and acquisition (M&A) deals exceeding US$500m were challenged on allegations of inadequate disclosure and conflicts of interest, according to Cornerstone Research.
Drooms’ report outlines the steps required by buyers to gain full clarity on a seller during the due diligence process. The white paper estimates that during the period for a typical mid-size transaction, 20,000 documents are required, with 2,000 questions being answered by over 100 specialists over an eight week data room duration. To ensure compliance and efficiency, Drooms recommends five manageable steps:
- Configuration: A well configured Q&A management platform ensures speed, whilst pre-selected confidentiality settings and Q&A quality gates in one central depository ensure security and efficiency.
- Execution: With the aid of virtual Q&A tools and clearly defined procedures, it’s possible to handle several thousand queries methodically and effectively.
- Monitoring: The monitoring phase requires the project manager to consistently track the status of each query and follow up with teams requiring further input within the allocated 72-hour response period.
- Updated Files: During the Q&A process, additional files often need to be uploaded in the data room in response to questions posed, which form part of the overall document disclosure of the transaction.
- Share Purchase Agreement (SPA) Disclosure: To ensure maximum disclosure, the entire Q&A flow must be incorporated into the reporting process, providing full background on bidder groups. By centrally storing the information, the reporting can be completed and contract ready within one minute before downloading to a portable document format (PDF) or Excel file and then onto a CD/DVD as part of the SPA disclosure.
“In 2013, 50% of Drooms’ clients opted for virtual Q&A due diligence over traditional Excel-based processes, a figure we expect to grow in 2014,” said Howard Revens, UK managing director at Drooms.
“We know from clients that the key considerations during the M&A process are: efficient flow of information between parties; a central depository; process control; enhanced security; identified answer queues, comprehensive reporting and disclosure tools.
“With clients facing increasing pressure to finalise deals faster while ensuring absolute compliance, due diligence automation is becoming more important than ever. Our five key steps are already helping clients meet today’s due diligence issues while protecting against the challenges of tomorrow.”
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