How Do You Ensure Nothing Gets Missed During Due Diligence in a Data Room?

September 05, 2024

by a professional in Montréal, QC, Canada

Navigating a data room during due diligence can be daunting, especially with the vast amount of information that needs to be assessed—from legal documents and financial statements to compliance records and operational data. Each M&A transaction brings its own unique challenges, making it essential to adopt a structured approach to avoid missing any critical details.

Do you have a preferred sequence for reviewing due diligence materials? What are your go-to strategies for making sure nothing slips through the cracks in a data room—whether it's using checklists, task management tools, or relying on expert insights?

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Reply by a professional
in Toronto, ON, Canada

Having directly worked on numerous datarooms and encountered all of the situations that follow in this post, I feel staying on top of the deal dataroom is a key element of a successfully executed diligence. Whether setting up a dataroom or getting access to one, dataroom monitoring and tracking is often an under-rated step in the diligence process, which is mostly handed over to a relatively junior team member of the deal team. However, certain pro tips to making sure one stays on top of its content alongwith updates to the dataroom, are captured below, based on my experiences.

1. Download the index - To begin with, implement a folder structure that mirrors the due diligence request list. Include a column in the list, to quote information received along with document reference from the dataroom and date it was received.

2. Regular check-ins - Conduct daily check-ins to see new data uploaded to the dataroom, and cross-reference available documents against the DD list.

3. Version control - Some datarooms are not structured properly or do not have a change log, as new data is uploaded within existing folders or existing files are over-written. This is where DD process becomes vulnerable to using incorrect data, and causes confusion between the parties involved around information provided. This is where careful assessment of the dataroom is required to ensure no new or edit to any data gets missed out. Slightly a manual task, but cannot undermine it's importance.

4. Regular follow ups - Regular reporting of missing or incomplete information early in the process leads to a quicker response and efficient management of data flow in the deal.

5. Stakeholder communication - This is qualitative and is used as a push to get data quicker. Often, data status is required to be provided to stakeholders weekly, and in such situations, a completeness metrics (e.g., % of checklist items covered) is included. This not only helps track completion of the data requests but also indicates the speed of data flow which can impact the diligence period.

Hope the above helps. To discuss any deal related matter further, please feel free to write to me at redacted or www.ksmc.ca.

Thanks.
Kapil Sukhija

Reply by a professional
in Montréal, QC, Canada

Thank you Kapil for this super complete answer. It will really help me on a daily basis.

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