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7 Ways Excel Fails at Managing M&A Due Diligence

If you always use Excel for your M&A Due Diligence process, it’s time to research other options. Excel is an inferior choice when it comes to this massive amount of data. Not only does it slow work speed down, but it can also create a lot of issues with team communication.

While Excel is a free choice, the common saying goes, “cheap products give cheap results.” By choosing new and innovative software options over Excel, teams can now have better sell-side and buy-side due diligence workflows and processes.

Why You Should Stop Using Excel to Manage M&A Due Diligence

Here are a Few Ways Excel Creates Inefficiencies

1. Batching Due Diligence Requests in Excel

Setting up a batching process in Excel can be difficult, and it has its drawbacks. Batching slows down the process and makes it challenging to know which requests have a higher priority.

2. Version Control Worries

Because Excel is not updated in real time, teams have to constantly pass an Excel tracker back and forth. For example, if you updated the Excel sheet, but your teammate did too, it’s hard to know which copy is the master. This also creates duplicate or missed work.

3. Updated Software

With all computer software, there are different versions released as new updates are made. VDRs update themselves with the use of plugins or some other simple process. The software itself still contains all of the original data from your work. Excel has many different versions, and they aren’t all compatible. 

4. Security Features

Excel files can be added to any email and shared with any person. There is no security to this software, just a simple download and it’s there. Which means that it can easily be forwarded to the wrong person.

A diligence tracker contains the most sensitive information about a deal and can be vulnerable in an email. For example, in 2016, hackers accessed Colin Powell’s emails and found very sensitive information showing that his company was interested in acquiring 14 companies. This scandal became known as the Colin Powell Salesforce leak.

In contrast to Excel, virtual data rooms are typically held to a high security standards. 

virtual data room security features

Most VDRs include

  • Strict ID protocol
  • Two-factor authentication
  • Customizable allowances
  • Data siloing in private  cloud servers
  • Encrypted and protected data
  • Eliminated insecure emails
  • 256-bit AES data encryption
  • SOC 1/SSAE 16/ISAE 3402
  • SOC 2 Type II
  • HIPAA/ITAR compliant
  • ISO 9001 / ISO 27001

5. Activity Data

Another huge downside to Excel is that you don’t know who did what. In a VDR, teams know exactly who did what, which documents were accessed, and how long users were active. Almost all VDRs come equipped with audit logs which keeps a log of all room activity, and the data can be exported for reporting.

Knowing this information can be incredibly helpful in managing diligence, identifying blind spots, and bottlenecks.

m&a due diligence excel analytics

6. User Errors

Fixing errors in Excel can be a nightmare. Spellcheck doesn’t exist, and if you type the wrong number somewhere, you’ll have to visually seek it out to locate and correct the issue. Manually entered index numbers are prone to mistakes, which can throw your indexes out of order.

7. Lack of Communication

Everyone knows that good communication is the key to success. Being able to talk to teammates, delegate, and assign tasks is vital to ensure that everything is being done as it should be.

Communicating effectively with your colleagues inside an Excel program is near impossible. It’s done with a back and forth commenting, and there are no functions to improve it. No reminders or notifications. It’s about as old school and outdated as passing a paper note back and forth in class.

8. Knowledge Transfer

Repurposing data in diligence for post-close integration and other activities is limited. This is one of the most important things to do after completing an M&A deal, and to be limited just makes it that much more difficult and time-consuming.

As you can see, there are a lot of downfalls that come with using Excel. It limits your abilities, wastes your time, and puts very sensitive information at risk of a breach. 

How can M&A Professionals Avoid Excel?

While Excel may have been one of the leading software programs at one point in time, advances in modern technology have brought us much better solutions for M&A deals. With virtual data rooms, teams can have a streamlined workflow that helps you to close deals faster.

DealRoom's virtual data room software

1. Utilize M&A Project Management Software for M&A Due Diligence

Unlike with Excel where you can’t see any of your teammates working on tasks, a VDR/project management software will show you exactly what they are doing at any given point in time. Not only that, but it can show the heat sensitivity for documents so you can see if they are hot (recently viewed) or cold (haven’t been touched). This is a good way to see what documents are actually being utilized and help teams quickly create due diligence reports.

2. VDRs Reduce User Error Risks

Thanks to AI technology, VDRs have a level of intelligence that can help to predict changes, analyze data and spot potential errors before you do. With Excel, you may have to spend hours looking for a misplaced decimal, but with a VDR it can be significantly faster to spot and correct.

3. VDRs Allow for In-Software Communication

They also allow for communication between workers through chat boxes and comment sections on documents. Thereby enhancing the communication and keeping the work going at a steady pace when there are questions or notes needing to be taken care of.

4. VDRs Make Better Use of Your Time

DealRoom’s M&A due diligence tools can help your team to never lose sight of the big picture goals, and help to spot potential risks while keeping everything organized. Teams can store multiple documents from various software programs all neatly within one VDR, and easily search and access files when necessary. Teams can also simply upload a due diligence checklist for M&A into the data room, and all their diligence requests will be neatly mapped out. This prevents you from needing to switch between programs and windows, helping you to make the best use of your time.

5. VDRs Help With the Entire M&A Deal Lifecycle

Another great benefit to DealRoom’s M&A due diligence software is that there is a software tools request tab. It’s a unique feature that eliminates the need for Excel trackers. It’s like an interactive checklist that can be applied to every step of the deal’s life cycle and not just due diligence. What this means is that you would no longer have to worry about Excel’s version control. You can comment, upload, tag, and assign all from the request feature.

It can be hard to adopt new processes and methodologies. It’s not easy to walk away from a software or technology, like Excel, you have been using for years or sometimes even decades. However, trying something new can provide enormous benefits for not just your team, but your client too.

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Useful Links

Why M&A Deals Need Virtual Data Rooms

What is a Corporate Development Tool?

Corporate development software is one of the best ways to help companies manage deal pipelines efficiently and effectively. In M&A deals, there is frequently lots of research and due diligence involved, and large amounts of information to accumulate very quickly.

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