Data Rooms software can bring excellent results to your accounting team

Modern technologies of information transfer now cover all spheres of human activity. And it is not a surprise because the creation and transmission of electronic documents in Virtual Data Rooms simplify the exchange of information. Let`s consider Data Room technology.

The principles of the due diligence process

At the present stage of the development of market relations, the process of increasing business activity by merging, selling, acquiring, opening branches of enterprises in different regions, attracting foreign investment is becoming widespread. On the one hand, the situation is favorable because there are additional sources of financing the activities of economic entities, employment is growing, production and sales volumes are increasing, fixed capital is renewed, but on the other hand – legal and financial risks increase, which in the future may lead to loss of assets of the buyer (investor), reducing the attractiveness of business in the market. A reliable way to minimize the negative risks associated with the conclusion of investment agreements is a detailed study of the enterprise by conducting a comprehensive inspection, called due diligence. 

It should be noted that today in a certain category of management personnel of enterprises, this system procedure can be associated with an audit. However, it is not appropriate to equate these two categories, as due diligence does not offer an opinion on financial statements as in an audit. The main purpose of this inspection is to gather information about the object and assess the potential risks associated with it.

At the same time, due diligence can be considered as an ancillary audit service, as this audit involves the collection, preparation, and analysis of information, and, in accordance with International Standards on Auditing, ancillary services cover agreed procedures and information preparation.

The role of Data Room providers in the procedure 

With due diligence virtual data room service, various transactions can be carried out much faster and projects can be carried out more conveniently. Since every successful deal requires effective strategies and rich integration features, due diligence is important for numerous industries.

VDR provides a high level of reliability of data storage, the flexibility of their placement and description, high scalability, and low specific cost of storage.

How a Digital Data Room works?

Potential buyers receive an internet link from the seller or the commissioned M&A advisor, with the help of which access to a secure area of a server is possible. Before entering, the interested parties must authenticate themselves with the name of the account and a password. Then you will be given access to the Data Room that is relevant and assigned to you. Different structures and representations can be implemented based on the existing, uniform database for different profiles and users. This makes it easier for certain target groups to find the content and documents they need. A distinction is made between the various main topics:

  • the legal situation so-called legal due diligence;
  • the tax situation so-called tax due diligence;
  • the financial situation so-called financial due diligence;
  • market or commercial due diligence also called business due diligence;
  • environmental due diligence;
  • the technology and infrastructure so-called technical due diligence or infrastructure or IT due diligence.

The navigation through the digital database takes place with the help of an almost intuitive graphical user interface, which, by clicking on it, enables access to documents and content and allows inspection. At this point, the user only has the opportunity to read the existing documents. This means that further use or copying is not possible. After a successful inspection, a log-out procedure disconnects the connection to the server and its data area again if required.