The business world is constantly making deals, and, of course, all of those transactions have multiple moving parts. Financial and legal details and documents must pass through intense scrutiny; facts and figures must be checked and all parties involved in the process must be able to agree on the final terms.
Being able to navigate through the incredibly dense deal in a timely manner, while keeping all parties satisfied, can seem like a tightrope walk — one mistake and it’s a disaster.
What Is the Q&A Period in an M&A Deal?
The Q&A period in an M&A process, also referred to as “due diligence,” is an evaluation process that is standard in any business deal to fully understand the risks and rewards of undertaking a merger or acquisition. Although there are stock answers about “getting the biggest bang for your buck” when it comes to due diligence, there is certainly more to it than that. The main reason for Q&A is so that the acquiring company can fully understand the business of the target company, its financials, and how the target company and its management operates.
In nearly every instance, the buyer (the acquiring company) carries out the M&A due diligence process while hiring third-party consultants in many cases. These third parties may include financial and tax experts, industry consultants and attorneys who lend their expertise to the proceedings. The categories that commonly fall under due diligence include corporate finance, technology and IP (intellectual property), legal, employee/staffing and tax and regulatory matters. Due diligence of the merger and acquisition process is generally handled in two locations: On-site with the principles of the target company and online in a virtual data room.
Tools To Streamline the Q&A Period
The due diligence period of a typical M&A process is quite often the most time-consuming portion of the entire M&A transaction. Due to the convoluted nature of a company’s financials, legal issues and corporate structure, there is the possibility of an enormous number of questions that could conceivably be posted by multiple participants involved in the negotiations.
This section of the deal can certainly slow the merger and acquisition process down to a crawl. However, there are some things you can do to expedite the process. These include:
Limit the Number of Questions Per Participant
Setting a limit on the number of questions per participant allows the most relevant and important questions to be submitted and forces the high-priority questions to be answered first. The answers to those questions often provide the answers for subsequent questions. The limit of questions and service level agreements for the response time for answers can be modified, depending on the deal.
Lessen the Decision Time of Questions
By establishing a list of subjects in advance for the acquiring company, all inquiries to one of those subjects will be routed to a certain project lead on the team. For example, a question under the “legal” category will be assigned to the legal council working on the project, and so forth. This is one of the automated benefits that a virtual data room (and associated tools) can deliver to help streamline this portion of the process.
Leverage a Robust VDR Solution
A virtual data room (commonly referred to as VDR) is vital in any M&A dealing. It is a secure online location where companies that are involved in the M&A process can store and share the documentation that is required for the M&A transaction. It has secure access, which includes enterprise-level encryption, multiple layers of security and user-friendly admin controls that allows you to seamlessly upload and download documents; it’s protected by version control and allows only certain parties access to certain documents. These tools surely help streamline the process for all parties to be able to shorten the entire M&A timeline.
One of the most essential tools in the VDR is the Q&A feature. Also known as the “Subject Matter Expert,” it assigns one (or more) administrators to respond to M&A due diligence questions from a particular permissions group, which frees the system administrator from being buried under a stack of questions. And administrators are assigned certain groups, ensuring the answer you receive is from the appropriate party. Having the ability to streamline this often cumbersome portion of the M&A is vital in order to proceed with a smooth, timely M&A.
Another benefit of a VDR is the user-friendly administration of security measures that can be implemented. The admin can set up different levels of security around certain documents. In short, that means that permissions can be set for one group of users to see certain documents, but not others. With tracking and alerts enabled, you can certainly be in control of permissions in your VDR.
When undergoing the M&A process, a trusted third-party VDR partner that contains all the appropriate tools for the transaction is a must. It will give you peace of mind that all security measures are in place, and the tools included will help expedite the entire process, making the data flow more smoothly and lopping weeks, if not months, off of the entire M&A timeline.
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Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.