The Q&A Feature for M&A Due Diligence
- What is the Q&A feature?
- How is the Q&A feature used during the due diligence process?
- Benefits and Concerns of the Q&A feature
- What is a modern approach for conducting due diligence?
- Why is a modern approach to conducting due diligence more useful?
What is the Q&A feature?
In virtual data rooms, the Q&A feature creates a way for users to ask questions regarding the folders and documents they have been given access to, without leaving the platform. Whenever a question is asked, an email alert is sent out, and the answer can be answered via email or through the Q&A tab.
How is the Q&A feature used during the due diligence process?
The Q&A tab typically consists of published, open, and closed questions. Published questions can be used for repeated questions or FAQs. Overall, the Q&A feature has been adopted by many traditional virtual data room providers as a way to encourage in-platform collaboration.
Benefits and Concerns of the Q&A feature
Not every m&a data room's Q&A feature is the same, each one varies slightly. With some platforms, only users that have been assigned specific roles can answer questions. Others require the question to be reviewed before it is made visible to others.
For example, a well-known traditional VDR provider doesn't allow administrators to ask any questions. The administrators are part of the one and only answer team, and only buyers can ask the questions. Buyers can link a file to a question but can not ask a question from an open file.
During the m&a due diligence process, buyers and investment banks can go back and forth asking questions and receiving answers without having to leave the data room. For example, someone may ask “Where are the financials from 2015?” and another user can point them in the correct direction. And while it provides some assistance, it still doesn’t streamline the diligence process. In the example above, the user didn’t have an easy way to find the 2015 financials and has to wait for the appropriate person to see the question. The user would then be emailed the file, sent the Excel tracker to see the status of the request (maybe the document wasn’t even collected yet), or given the folder name in the data room.
That’s why at DealRoom, we took a slightly different approach with our Q&A feature. We wanted users to still be able to ask questions, and other users to see FAQs, but we also wanted to eliminate the use of Excel from the diligence and virtual data room process. This is how we came up with our “Requests” tab.
Instead of relying on Excel trackers, all buyer document requests and communication regarding the due diligence process can go through the data room. Everything is updated in real time, so users no longer need to worry about version control. DealRoom supports all file types, so folder structure uploading and sharing is easier, or safer. Teams can upload pre-made templates, and the room will automatically populate with the diligence requests. From there, users can request files, documents, and tasks from specific users. Within each request, users can add attachments, set due dates, write comments, ask questions, and more. They can mark the status of the request.
Each buyer group can have their own separate request lists. In the image below, you can see that there is a group for each of the buyers and a separate group for due diligence. Apple’s requests list consists of categories such as finance and accounting, legal and insurance, contracts, organization, IT, and more. Anytime the bank has a question for Apple regarding contracts, they can create a new request in that list. This allows for everyone involved in the deal process to be collaborative, find the documents and files they need, and they never have to leave the platform.
Modern approach to due diligence Q&A
1. Eliminates Excel trackers
2. Captures Analytics
3. Real Time Updates
4. Team Member Delegation
5. Automates Tasks
6. Tracks Due Dates
7. Securely Stores All Documents and File Types (Read also about virtual data room security)
8. Streamlines Processes
Why it is more useful?
The idea of “requests” is very different from the traditional way of completing due diligence, however, it provides many benefits. It helps eliminate the needs for Excel trackers, back and forth emails, and frequent phone calls and meetings from the diligence process. It also helps teams capture insightful analytics and prevent duplicate work. When teams use the traditional method of completing due diligence, they usually do a bulk download. All information is looked at offline and banks have no idea who is looking at what.
In contrast, when everything goes through the platform, banks can paint a clear picture using the captured analytics. They know exactly what documents have been viewed, by who, and for how long.
We know it can be hard to adopt new processes and methodologies. It’s not easy to walk away from a software or technology 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.