Due Diligence Checklist for Virtual Data Room Preparation


M&A is a highly involved, drawn-out, and protracted procedure that calls for frequent document exchanges (and copies of those documents) between parties. Virtual data rooms (VDR) have become standard practice in the business due to the challenges associated with correctly and efficiently organizing massive amounts of data. By automating the categorization and structuring of documents in the M&A process, Imprima’s AI-powered Smart Index software not only reduces the likelihood of human error but also nearly 90% of the time allocated for data sorting.

Due Diligence Documentation for Business Information

This section includes records pertaining to the company’s incorporation as well as any necessary trade licenses or permissions. Several of the common documents include:

  • investor certificates;
  • federal, state, and local business permits;
  • municipalities’ approval;
  • constitutional documents;
  • IP & Trademarks overview;
  • employment agreements for important personnel;
  • information on taxes.

These documents are mostly used to check for compliance with state and municipal laws.

Documents Used in Financial Due Diligence

Possibly the most important group of documents, the financial due diligence entails gathering several financial records, including:

  • certified financial statements;
  • correspondence from the auditor;
  • agreements for financing or loans with banks;
  • strategic plans and predictions;
  • existing business continuity strategy;
  • accounts-related notes.

This set of documents necessitates not only checking the mathematical precision of financial statistics but also evaluating the presumptions and methods used to derive them.

Documents Used in Human Resources (HR) Investigations

As the name implies, HR is responsible for managing the human resources of the business, including current workers and independent contractors. The range of required documents includes:

  • health and safety regulations;
  • employee resumes;
  • policies for paid holidays, sick days, and overtime;
  • information on training programs;
  • evaluation procedures;
  • conditions of benefits provided by the company.

The purpose of gathering these documents is to determine whether policies should be maintained or changed as well as to calculate severance pay in case of layoffs.

Documents for Legal Due Diligence

Comparable to the Business Information area, with the main distinction being a more constrained focus. Documents pertaining to business transactions between the corporation and other entities or people are requested in this area. Some instances include:

    • vendor contracts;
    • agreements for settlement;
    • lease contracts;
    • loan contracts;
    • distributor contracts;
    • current state of litigation.

Documents Proving Due Diligence on Intellectual Property

The management of documents pertaining to patents, trademarks, industrial designs, and other intangible property falls under the purview of the intellectual property section and requires considerable analytical reasoning and judgment on the part of the party performing due diligence:

      • communication with pertinent regulators;
      • valuation declarations;
      • inspector reports.

Since intangible asset costs are typically based on assumptions, it is necessary to examine their valuation to determine their most accurate value.

The management of papers in an M&A transaction involves many different aspects, and omitting important data could have a significant effect on the deal’s viability. Therefore, it is in the best interests of all parties to populate the data room using a taxonomic method. Smart Index can automate this procedure.