Traditionally, companies carried out due diligence activities only when there was a merger and acquisition (M&A) on the horizon, and M&As didn’t happen all that often, with the result that most businesses didn’t pay due diligence much attention.
Today, you no longer have that luxury. In 2019, M&As totaled $3.9 trillion. Over the last 7 years, M&As have occurred far more frequently than in the past, and the trend is expected to continue into 2020. One survey found that 52% of companies intend to pursue an M&A in the next 12 months. You can’t delay an M&A while you scramble to get your house in order.
What’s more, due diligence goes beyond preparing for M&As. in 2020, being due diligence ready should be a basic tenet of good business practice, as fundamental as having a business bank account. When your business is due diligence ready at all times, it has a positive domino effect on the entire company.
Here are 6 reasons why you should be due diligence ready around the clock.
1. You’ll never miss a business opportunity
Today’s M&As are fast and furious. The pace of business is measured in seconds, not days, so you need to have all your financial documents, contracts, and data reports ready to present more or less on demand if you want to take advantage of them.
It’s even better to be M&A-ready before one appears on the scene, so that you can jump at every business opportunity that crosses your path, no matter when or where you are. Business opportunities won’t come back again in 2 months time when you’ve managed to find all your files.
2. You’ll have the upper hand in business negotiations
When you can retrieve the right documents and present your due diligence files instantly, it gives you the upper hand in every type of negotiation. That goes way beyond M&As to include proposed partnerships, the possibility of onboarding a new client or being onboarded as one, and other business situations.
A platform like ContractZen helps raise your reputation and sets you up as a strong business partner. Your company doesn’t panic when asked for contracts with a particular supplier, minutes discussing a certain business challenge, or financial documents, because ContractZen keeps everything organized and easily to hand.
OCR search and metadata tagging ensure that nothing is ever misplaced or misfiled, and the virtual data room allows you to share chosen files securely and instantly with investors, partners, and clients. Additional features like e-signatures and collaboration and communication tools make you a force to be reckoned with in every type of business negotiation.
3. You’ll have nothing to fear from compliance and tax audits
Over the last few years, privacy legislation, money-laundering regulations, and financial integrity requirements have all snowballed. Compliance and tax audits can come at the drop of a hat, and you need to be ready for them.
But if you’re due diligence-ready, audits won’t scare you, and fundraising initiatives that bring close examination of your corporate governance won’t keep you awake at night, either. You can and do use strong user permissions to grant and remove access easily. You know exactly who has access to which documents and data at all times, and have total confidence that they are stored securely.
4. You’ll make better business decisions
Here’s a harsh truth: if your data and documents are in chaos, your decision-making will be chaotic too. But the reverse is also true. When you’re due diligence ready, you’ll be able to base your business decisions on solid data. If you don’t know all the facts and figures you need at the moment, you certainly know exactly where to find them. With your reports up to date and outdated documents and contracts removed and archived correctly, you can make the best possible choices to help your business grow and thrive.
5. Your business will be more productive
According to a recent study, 85% of employees lose at least an hour of productive work time every week, searching for information. Everyone has experienced the frustration of wasting hours trying to find a document that’s been filed in the wrong place, or waiting for someone to approve access to the resource you need to get on with your work.
But when you’re due diligence ready, centralized document storage, collaboration platforms, and streamlined access controls can boost productivity. Keep everything organized, help everyone access the resources they need, when they need them, and always know exactly where you are in the process of creating contracts and agreements.
6. You’ll save money .on contracts
Keeping all your contracts and agreements filed correctly is an important part of due diligence. This way, you’ll know when contracts need to be renewed and when to renegotiate a better deal. It’s estimated that poor contract management costs the typical company 9% of its annual turnover, but due diligence can prevent that. There’s no need to leak money by continuing to pay for tools you don’t use any more and contracts that are no longer relevant, so apply sensible due diligence tactics to prune your contract expenses.
Due diligence is part of maintaining a healthy business
It’s clear that today, due diligence isn’t just for M&As; it’s what keeps your business healthy and successful. When you’re due diligence ready, you get a number of extra benefits like being able to respond to business opportunities; improved decision-making; saving money on contracts; raising your business profile; easing compliance audits; and increasing business productivity. These are bonuses that appeal to every company in every vertical, so there’s no good reason not to be due diligence ready.
