Tips for Sellers to Help Potential Buyers Conduct Effective Due Diligence

03 April, 2014

Performed by a buyer to determine whether to purchase a business, due diligence is the process of gathering necessary information to evaluate the actual or potential risks involved in the transaction. The seller provides the interested buyer with disclosures and information, such as any risks involving the target business.

Because due diligence can be a very intricate and potentially overwhelming process, it is important to understand how sellers can simplify the process for potential buyers to avoid any unforeseen challenges during the process. To help you as a seller navigate and facilitate a successful due diligence process, we recommend following these tips:

Use Reference Numbers and Specific File Names
Stay organized by incorporating reference numbers and using specific files names for documents that you load into the data room. File names should include a helpful description that is specific to that document, so that anyone searching for specific information will know what to look for and what they are about to open. Using names such as “DocScan1234” will only lead to inefficiency and confusion. Sophisticated data rooms can even be configured to allow encrypted downloads of documents from the data room. When this capability is utilized, as in the case when the documents have thousands of pages, then such numbering / naming conventions become a necessity.

Allocate Responsibilities
Determine in advance who is responsible for which tasks during the process by meeting with internal and external legal and financial advisors prior to of the due diligence process. You will need to scan, upload and organize documents in order to make way for a smooth due diligence effort, so it’s important to know who is responsible for scanning and uploading, organizing documents, informing others that new documents are available, and so forth.

Complete Responses Are Important
Buyers rightfully want to have access to every detail related to contracts, financial statements, accounting records, and other important data about the business they may purchase. Before providing requested documents, make sure they are the most recent and updated versions, and be sure that they include all required signatures and attachments. Anything that is missing can potentially extend the process.

Load Files in the Data Room
Data rooms allow you to easily and securely control, share and track all of your confidential documents. Parties involved in the merger or acquisition can access documents easily and securely from any Internet-enabled device around the world. Data rooms should allow you to easily upload multiple files at once and organize your documents with tags for efficient access. You should also be able to have meticulous control over who can access which document, and save, print and take a screen shot. Ideally, the data room should allow you to put a digital watermark on all documents (both on the screen and in print), so that the user who accessed the document can always be tracked. In addition, the data room should allow you to perform “virtual shredding” of documents by revoking access to the documents even after they are downloaded to a remote device. Finally, you should be able to pinpoint who has accessed which pages of which documents when and for how long which will allow you to gauge potential buyers’ interest levels. But most of all, the documents you share should be protected by the highest level of security.

Thousands of companies have trusted ShareVault® since 2006 to manage external access to their most sensitive documents. ShareVault leads the industry in providing secure document sharing solutions, also known as virtual data rooms, that allow businesses to control and track sharing of proprietary documents. As one of the few products that support both the PC and Mac platforms, ShareVault offers not only bank-grade security and reliability, but also unparalleled ease of use and relentless customer support. Visit www.ShareVault.com to find out how ShareVault can facilitate your due diligence process.