Considering that the global pandemic may result in a significant delay in the fulfillment of the parties’ obligations under the contract, force majeure clauses in the documents for the M&A transaction should be carefully analyzed by the parties to the agreement. Let’s consider how to maximize due diligence processes with the VDR best practices right now!
What are the most important features for maximizing due diligence?
With the development of business, almost any company gains experience in various audits: the company is audited by government agencies and institutions, creditors and partners, but full-fledged due diligence is, as a rule, a deeper and more complex procedure that may require significant transparency from the company itself, its management and shareholders.
A synergistic effect while due diligence processes can occur due to savings due to the scale of activity, a combination of complementary resources, an increase in the competitiveness of manufactured products (due to market monopoly), etc. The synergistic effect may be different in its essence, which is related to the main goal of the management of the buyer’s company in the case of a merger or acquisition. The organization establishes and maintains a comprehensive management program that includes the following:
- lists of documents for each business process and requirements for information to be included in documents;
- decisions on what form and structure should be created and included in the system documents and what technologies should be used to create and process them;
- the effectiveness of the management of the organization that keeps the area of office work up to date.
Mergers and acquisitions are agreements that are accompanied by the transfer of ownership rights and control over the company from former shareholders to new ones. One of the characteristic features of merger and acquisition agreements is an increase in the scale of the new owner’s business. While maximizing the due diligence processes, it is important to clearly state the following:
- What data is confidential?
- What is the procedure for returning and deleting confidential information at the request of its owner?
- How does the recipient of such information have the right to use it?
- Liability for breach of disclosure of confidential information.
How to maximize the due diligence processes with the best VDR practices?
The VDR system of due diligence is a system in the form of a computer program, software, etc., which allows you to organize and maximally automate work with documents at all stages. That is, the VDR functionality should include the ability to create, make changes, sign, store “papers” and some organizational capabilities (for example, search and classification). Because virtual data rooms are easily integrated, as described at https://datarooms.org.uk/due-diligence/, users can easily collaborate in real-time using audio, video, and messaging.
The virtual data room providers work as part of a dedicated due diligence team that provides the following:
- private investors and companies, buyers and sellers with a wide range of legal, financial, and tax services to support the placement of shares and foreign securities markets;
- support for all types of mergers, acquisitions, leveraged acquisitions, joint ventures, investment, and financial structures (including private and foreign investments);
- asset divestments and spin-offs, and post-acquisition business support.
With the virtual data room software, M&A parties can securely exchange confidential documents and perform due diligence. The purpose of documentation in the due diligence process approach is to create an organizational, methodological, and regulatory framework for the construction and operation of a quality system that meets the recommendations and requirements of standards.