In-person versus virtual: Each has advantages for due diligence

Before the pandemic, due diligence management meetings, except for extenuating circumstances, were held in person. Looking the management team in the eye, and observing body language, allowed investors, their due diligence providers, and management teams to get more comfortable with each other.

In person due diligence meetings not only served as an ice breaker, but also resulted for a more seamless and efficient process in exchanging critical information. When everyone is together onsite, the management team could break away to obtain information real time and work directly with the diligence team to address requests directly from its system. Sensitive discussions and areas for potential disagreement and debate could more easily be diffused in the moment when in person. For due diligence teams, traveling to onsite management meetings also generated more spontaneous interaction, often leading to more collegial and collaborative reinteractions. An added bonus was that if clients were present, it strengthened the relationships with their diligence team who they might never otherwise meet.

The pandemic changed much of this. Today, onsite due diligence meetings have been replaced by Zoom calls and Teams meetings. In-person meetings are occurring less frequently and are not top of mind for many in today’s hi-tech deal-making environment.

So, why this reluctance to embrace on-site meetings? It’s hard to believe travel costs are a factor since they would be largely inconsequential in relationship to the total value and costs of a transaction.

Part of the issue is a societal one. All of us have undergone a permanent shift in how we approach our daily lives and what’s most important to us. People no longer want to commute. Flying to meetings on planes, or boarding trains and subways, are things many of us are avoiding unless absolutely necessary. With so many people working remotely, getting the right people to the right location for an in-person meeting is often a scheduling nightmare. The past three years have forced us to streamline our approach to many tried and true processes – including how we conduct due diligence meetings.

While it may be a bit too early to tell, despite fewer in-person management meetings, it doesn’t appear our virtual way of doing business has led to more post-closing disputes or significant changes to our findings and deal outcomes compared to pre-pandemic engagements.

But what about due diligence team members – notably those recently joining the industry – who have spent all or most of their careers in virtual meetings? The opportunity for them to participate in an onsite meeting is exciting.

A member of our team recently went as far as to say, “I am so pumped we are going onsite….” Onsite due diligence meetings give team members at all levels the ability to interact with senior level management, including the C-suite, and improve their inter-personal skills. Watching their peers and managers react to sensitive and difficult situations is a great learning and development experience. It's priceless. And while technology has changed the world, there is nothing like building a relationship in-person. It helps all of us, especially younger professionals, hone our communication and social skills.

So, what’s the answer? In some ways, this discussion has parallels with the ongoing debate about RTO. When comparing virtual to in-person meetings, they both provide advantages. This is most certainly true for the due diligence process.

We should look at each individual situation and assess the pros and cons before deciding. It may take time to find the optimum balance.