Due diligence always involves piles of sensitive information and confidential documents, for which security is paramount. At the same time, the number of data breaches in the UK is staggering — only in Q3 of 2024 more than 8 million records were exposed, with the average cost of a data breach being $4.53 million. Such statistics call for reliable solutions, such as due diligence software. 

Due diligence software, often presented by a virtual data room (VDR), provides secure storage for sensitive due diligence data and collaboration capabilities for all parties involved. 

This article explores the fundamentals of due diligence software, its key features, and its benefits. Read on to learn how to choose the right due diligence software and get the list of top 5 vendors on the market.

What is due diligence software?

Due diligence software is a digital tool that helps businesses investigate and analyze data before making big informed decisions, like buying another company or signing a major contract. It organizes and automates the process of gathering, reviewing, and managing data, making it easier to check financial statements, legal documents, risks, and other key details.

Due diligence software is used during the due diligence process in various industries where risk evaluation is crucial, such as: 

  • Mergers and acquisitions (M&A). Buyers and investors use this software to assess a target company’s financial health, legal status, and potential risks before purchasing or merging with it.
  • Real estate. Investors and realtors use it to evaluate properties, check ownership records, and assess market risks before making transactions.
  • Compliance and regulations. Organizations use due diligence tools to verify business partners, prevent fraud, and comply with laws such as anti-money laundering (AML) and data protection regulations.

Core features of due diligence software

Due diligence software helps make the review process more streamlined and effective due to dedicated features. The most common ones are about:

  • Data security. It protects sensitive business information using strong encryption, multifactor authentication, and advanced security protocols. It prevents unauthorized access and keeps data safe from cyber threats. Additionally, there are dedicated data security features such as watermarking, redaction, fence view, and more. All these ensure the sensitive data shared during the due diligence process is kept confidential.
  • Document management. The software helps store, organize, and manage vast amounts of data efficiently. Users can easily upload, sort, search, and retrieve files, ensuring quick access to important information during due diligence. For instance, there are features such as bulk upload, file labeling, full-text search, and automatic index numbering.
  • Collaboration. Teams, investors, legal advisors, and compliance professionals can work together in real time thanks to dedicated collaboration services, such as the Q&A section. With it, users can leave comments on certain documents or parts of a file and get a prompt reply from an expert.
  • Access control. Admins can set different permission levels for users. This ensures that only authorized people can view, edit, or download specific files, reducing the risk of data leaks.
  • Data analytics. Built-in analytics tools track user activity, document views, and engagement levels. This helps businesses understand how stakeholders interact with the data and identify areas that need attention.
  • Compliance and reporting. The system generates audit trails and compliance reports to meet legal and regulatory requirements. This ensures transparency and helps businesses maintain accurate records for future reference.
  • Customizable checklists. Users can create and modify checklists tailored to their due diligence questionnaires. This feature helps keep tasks organized, ensuring that all necessary steps are completed.
  • Integration with other systems. The best due diligence software can also connect with other business tools like CRM, project management, and accounting software. This can significantly improve efficiency by allowing data to flow seamlessly between platforms.

Benefits of using due diligence software

Here are the main advantages due diligence software brings to businesses:

  • Improved collaboration. Due diligence software provides a centralized platform where all stakeholders can access, share, and review documents in real-time, ensuring seamless collaboration. With cloud-based access, team members from different time zones can work together efficiently, preventing delays and miscommunication, which are critical for business transactions such as M&A.
  • Better data organization. Due diligence software categorizes and indexes documents systematically, making them easy to search and retrieve. This helps teams avoid duplication and ensures no crucial information is overlooked.
  • Risk mitigation. Due diligence solutions ensure that stakeholders better coordinate by providing a dedicated set of features that enables workflow automation and helps detect red flags faster. This, in turn, helps to reduce risks.
  • Enhanced data security. Due diligence involves handling sensitive financial and legal information. Due diligence software ensures that this process stays safe, by providing secure storage for sensitive documents and offering a variety of security features, such as encryption, access controls, redaction, watermarking, and more.
  • Data accuracy. Modern due diligence software provides version control capabilities, which helps ensure that you can always track all the document versions. What’s more, all the changes are synchronized between all devices, so that when someone edits a document on a mobile, it’s automatically edited on the desktop as well, and the software presents accurate data to stakeholders.
  • Compliance. Regulatory compliance is a major concern in M&A and investment deals. Due diligence software ensures businesses meet industry regulations by providing audit trails, document tracking, and automated compliance checks.

Additional read: Learn the fundamentals of operational due diligence and how it differs from other due diligence types.

10 steps to choose the right due diligence software

Selecting the best due diligence software depends on your company’s size, industry, and specific needs. However, there are common recommendations:

  1. Define your requirements. First, you need to understand your key needs in software, such as document management, compliance tracking, or risk assessment. Consider the number of users and their required access levels to ensure smooth collaboration. Understanding your goals will help you avoid unnecessary features and costs.
  2. Check industry-specific features. Different industries require tailored functionalities to meet compliance standards and operational needs. Financial firms may need advanced risk analysis tools, while healthcare businesses should focus on regulatory tracking. Choosing software designed for your industry ensures better performance and security.
  3. Evaluate integrations. Seamless integration with your existing tools, such as CRM, data storage, and project management systems, is crucial. It reduces manual work, improves workflow efficiency, and ensures data consistency. If needed, check whether the software supports API connections for custom integrations.
  4. Assess user interface. A user-friendly interface makes it easier for teams to adopt and use the software effectively. Complicated systems can lead to human errors, delays, and additional training costs.
  5. Review security and compliance certificates. Since due diligence involves handling sensitive data, robust security measures are essential. Look for software with encryption, multifactor authentication, and compliance with regulations like GDPR or HIPAA. This will help to minimize possible risks and legal complications.
  6. Assess collaboration capabilities. The software should allow real-time collaboration. Features like task assignments, document sharing, and progress tracking enhance productivity. Q&A sections can help teams meet to clarify arising issues faster.
  7. Analyze reporting and analytics. Comprehensive reporting tools help track progress, identify risks, and improve decision-making. Look for software that offers customizable dashboards and automated report generation. Clear, data-driven insights can streamline due diligence and support strategic planning.
  8. Look for strong customer support. Reliable customer support is important as it can prevent workflow disruptions and ensure smooth implementation. Choose software with responsive support, preferably 24/7, if your team operates across time zones. Checking user reviews can help understand the provider’s service quality.
  9. Test before committing. Most vendors offer free trials and demos so that you can assess whether the software meets your needs before purchasing. Involve key team members in testing to get valuable feedback on usability and features. This step reduces the risk of investing in an inefficient or overly complex tool.
  10. Compare pricing. The software should fit your current budget while allowing room for growth. Scalable solutions ensure that as your company expands, the software can handle increased data and user demands.

Top use cases for due diligence software

Here are some of the most common use cases where due diligence software is helpful:

  • M&A. Companies use due diligence software to review financial records, legal documents, and operational risks before making a deal. It helps streamline data collection, ensures compliance, and speeds up decision-making. With all documents in one place, teams can collaborate efficiently.
  • Vendor and supplier risk assessment. As much as 60% of data breaches happen because of third parties. That’s why businesses should carefully assess potential vendors and suppliers to ensure they meet security, compliance, and financial stability requirements. The software automates background checks, monitors risks, and provides real-time insights.
  • Regulatory compliance audits. Companies in regulated industries need to prove compliance with laws and industry standards. Due diligence software helps track necessary documentation, manage audits, and generate compliance reports. This ensures businesses stay up to date and avoid legal penalties.
  • Investment due diligence. Investors use due diligence software to analyze financial health, market position, and potential risks before funding a company. The platform centralizes financial statements, legal records, and performance reports. This makes the investment evaluation process more accurate and efficient.
  • Real estate transactions. Real estate firms and buyers use due diligence software to verify property ownership, zoning laws, and financial records. It helps organize contracts, conduct risk assessments, and ensure legal compliance. 
  • Franchise and partnership evaluation. Franchisors and business partners perform customer due diligence to assess potential franchisees and collaborators before signing agreements. The software helps review financial performance, legal history, and operational capacity. This reduces the risk of entering into unprofitable or risky partnerships.

Top 5 due diligence software solutions

Now, let’s take a look at the top due diligence software products that are also top virtual data rooms (VDRs).

  1. Intralinks. It is a widely used virtual data room designed for secure document sharing during M&A, legal, and financial transactions. It offers advanced security features like AI-powered redaction, four levels of access controls, and watermarking. The platform also offers real-time activity tracking which allows improving efficiency during the due diligence process.
  2. Datasite. This is one of the oldest VDR providers on the market, founded in 1968. Datasite specializes in due diligence for M&A, fundraising, and restructuring processes. It provides features such as real-time analytics, Q&A, redaction, and five levels of granular access controls. Additionally, it has an AI-driven search, which makes spotting required information easy.
  3. Ideals. This virtual data room provider is known for its excellent customer support, ease of use, and strong security features. Ideals offers eight levels of granular access permissions, full-text search, redaction, IP address-based access restrictions, and more. Moreover, they offer multi-project management capabilities, which allow you to manage several due diligence processes simultaneously.
  4. Box. This is a cloud-based document management system that serves as a flexible due diligence solution. It integrates with popular business tools like Microsoft 365, Google Workspace, and Salesforce, allowing seamless collaboration. Box provides strong security features, including encryption, access controls, and compliance with major industry regulations.
  5. Ansarada. This is an AI-powered virtual data room provider that automates the due diligence process with AI tools. Additionally, there’s a variety of security features such as redaction, watermarks, four levels of access controls, two-factor authentication, and more. It also offers reporting capabilities, which is important for compliance.

Summing up

  • Due diligence software is a digital tool that helps review and manage documents involved in due diligence. Virtual data rooms are often used as due diligence software.
  • Key features of due diligence software include data security, document management, collaboration, access control, data analytics, compliance and reporting, customizable checklists, and integration with other software.
  • Among the main advantages of using due diligence software are enhanced data security, data accuracy, improved collaboration, better data organization, risk mitigation, and compliance with core standards and requirements. 
  • Due diligence software is mostly used during M&A, real estate transactions, franchise and partnership evaluation, Investment due diligence, vendor and supplier risk assessment, and regulatory compliance audits. 
  • Top 5 due diligence software are Intralinks, Datasite, Ideals, Box, and Ansarada.

FAQ

What is due diligence software used for?

Due diligence software helps businesses gather, organize, and analyze critical information before making major decisions, such as mergers, acquisitions, or partnerships. It streamlines data collection, risk assessment, and compliance checks, making the process faster and more reliable.

Can small businesses benefit from due diligence software?

Yes, small businesses can use due diligence software to assess risks, verify business partners, and ensure compliance. It helps them make informed decisions without needing a large legal or finance team. What’s more, many solutions offer scalable features that fit different business sizes and budgets.

How secure is due diligence software?

Most due diligence software uses strong encryption, access controls, and compliance standards like GDPR or SOC 2 to protect sensitive data. However, security depends on the provider, so businesses should choose trusted vendors with proven security measures.

Are there free due diligence software options available?

Some providers offer free versions or trial periods with basic features, but they may have limits on data storage, integrations, or support. For full functionality, businesses usually need a paid plan. 

How does due diligence software integrate with other tools?

Due diligence software often connects with CRM systems, document management tools, and financial platforms to streamline workflows. Many solutions offer APIs or built-in integrations to automate data sharing and reduce manual work.