The Best Online Tools for Due Diligence

When you decide to purchase a business from its current owner, there is a period between signing the initial purchase agreement and actually closing the deal called the due diligence period.

During the due diligence period, you take a deep dive into the company’s finances, material contracts, customer and employee information, existing licenses, real estate holdings, and basically any information you need to understand the potential risks and rewards of owning the business. Moreover, during the due diligence period, the owner discloses potential problems and liabilities that can result in modifications to the sales agreement or the potential buyer walking away from the purchase. 

Due diligence may yield hundreds of documents for a prospective buyer, broker, or legal council to review. That can get complicated – and expensive.

Fortunately, there are a variety of online tools available to streamline the process. Read on to learn more about the best software tools to help remove some of the inefficiencies and confusion from the due diligence process. 

Why Should You Consider Due Diligence Software?

Here are some of the key benefits of using due diligence software:

• An automated software system can store multiple documents in a central location, making it possible to organize them into discrete categories for easier retrieval.
• It gives the seller, vendors, and other parties a secure way to send documents containing sensitive information.
• The software platform makes it easy to directly communicate with the seller and other involved parties. Due diligence software gives you access to investigative tools that simplify decision-making.
• The software allows you to save time – some of these tools use AI algorithms that can analyze large volumes of data quickly and efficiently and spotlight the precise information you need.
• It can also save you money because you may not need to hire a lawyer to analyze the documents.
• Automation and a centralized platform lead to fewer errors and simplify the auditing process.
• You will seem like a consummate professional.

Even when the business sale is relatively simple – for instance, you want to purchase a sole proprietorship that offers a service, like tutoring or dog walking – having a central place to store financial data provides reassurance to both you and the seller. For more complicated transactions, you can’t beat having tools to analyze data quickly and effectively.

The Best Due Diligence Software for Small Business Acquisitions  

Deal Room

Deal Room is an M&A lifecycle management platform claiming to “complete requests in half the time” using “innovative project management features.” 

Pros

• Choose from one of 10 templates to transform your due diligence checklist into an automated system. 
• Access to 24/7 customer service, including someone to help you automate your checklist. 
• Employ intuitive tools that allow you to drag-and-drop documents, perform full-text searches, collaborate with people right on the platform, and selectively restrict individual access to documents by assigning them one of four levels of permission. 
• Enjoy some of the best data security features in the industry.

Cons

• With a starting price of $1295, Deal Room is pricey for an individual wanting to purchase a single small business.
• Although it offers a buyer-side due diligence template, the platform is designed more for sellers and investors managing large acquisitions.  

Share Vault

Share Vault bills itself as “a virtual data room to help you collaborate and close deals.”

Pros

• Clients can choose the “Express” option, which provides clients an upgrade from managing the due diligence process themselves, but is less extensive than Share Vault’s other product offerings.
• Enjoy a 7-day trial that includes unlimited usage and a personalized walk-through of platform features from members of their highly-rated customer support team. 
• An activity-based heat wave allows you quickly to visualize user activity so you can see who has viewed files and how long they’ve looked at them.
• Revoke permission to view documents even after the file has been downloaded through a feature Share Vault calls “remote shedding.”

Cons

• Pricing is not transparent on the website, hindering an at-a-glance comparison among plans.
• The dashboard is less intuitive than other options.

iDeals

iDeals has been around for 14 years and they have developed one of the easiest virtual data rooms for a novice.

Pros

• Access customer assistance in 12 supported languages.
• Employ investigative tools that can pinpoint whether your target business has liabilities and assess its IT structure.
• The ability to drag-and-drop upload files into 25+ formats.
• Take up to a month free of charge to explore the dashboard and its tools.

Cons

• Prospective users must now speak with a customer support specialist to know the pricing of even their most basic (pro) plan.
• Prices increase when the files are longer.

Signal X

Signal X claims to be “on a mission to make the world a safer place to do business by simplifying third-party risk management and credibility assessment.” They are certainly global in reach – the website points out that they are India’s most comprehensive due diligence platform. 

Pros

• Download sample due diligence reports straight from the website so that you can easily assess the features of the platform.
• Run over 200 checks in 48 hours.
• View color-coded dashboard stats in different formats – graphs, pie charts, bar charts – to analyze data at a glance. 
• Take advantage of Signal X’s proprietary machine learning algorithms, which process the company’s vast third-party datasets to reduce false positives and help construct more meaningful interpretations of data.

Cons

• The site does not mention pricing, nor does it offer different levels of service.
• Although it is a global company, Signal X does much of its business in India, which may be limiting to some U.S. investors.

Nexis Diligence

Nexis Diligence, a subsidiary of Lexis Nexis, “serves as the all-in-one due diligence software for assessing any potential risk from the people and third-party entities interacting with your business.” An established company with a strong reputation, it has a particularly robust data bank.

Pros

• Access Dun and Bradstreet UBO data on hundreds of millions of companies and entities worldwide. The company houses a whopping 82 billion public records from over 10,000 sources.
• Get risk mitigation guides and expert help on conducting due diligence right on the website. In this respect, Nexis Diligence offers more substance than most competitors.
• Employ tools that monitor case law, regulatory, and current statutory developments.
• Seamlessly integrate several third-party applications.

Cons

• The site is geared more toward enterprise clients or established firms looking to make multiple acquisitions than someone looking to purchase a small business. 
• Nexis Diligence is less user-friendly, especially at the beginning, than other M&A platforms. 

Some Final Observations

Many virtual data rooms and M&A platforms researched for this article offer similar features, including the ability to share data securely, assistance with due diligence checklist onboarding, and robust data analytics tools. Some boast proprietary AI algorithms; others have amassed vast public records databases. Still others cater to niche audiences. In fact, you can find platforms that specialize in fintech or real estate acquisition, or one whose clientele is dominated by a single industry.  

Because it would take too long to list every single feature these due diligence software solutions offer – and plans are changing all the time to keep up with technological advances – you’ll want to do a deeper dive to make sure that the company you select best meets your individual needs. Fortunately, most platforms offer free trials, so you can test several different dashboards before committing to one.