Streamline the DDQ process with AI-Powered Search

Background

Due diligence is an essential exercise for any business looking to complete an M&A process or enter into an agreement/partnership with a third party. Without due diligence, there’s no way to get a clear understanding of how third-parties conduct their day-to-day operations or evaluate the pros and cons of a potential investment.

A key part of this process is the inclusion of a due diligence questionnaire (DDQ), which seeks to investigate a series of aspects about a third party, with questions targeted around particular areas of the business that are of highest importance to the purchasing party.

However, whilst DDQs are critical to demonstrating a best in practice due diligence process, they also create a frustrating, tedious administrative burden for the in-house legal teams whose job it is to fill them in.

DDQ challenges

Even though most DDQs end up being slightly different formulations of the same questions, there isn’t a “one-size-fits-all” approach that legal teams can take to answer them.

Manual search

Whilst it might sound easy enough to answer questions they’ve already answered before, without purpose-built technology to help them, this often requires legal teams to manually trawl through all of their old DDQs to find a relevant answer to copy in, ask their colleagues for help, or in many cases, simply end up writing out the same answers again and again.

With so much of their time and internal resources already taken up by the demands of low-value, routine legal work, DDQs are another time-consuming, repetitive responsibility that prevents legal teams from focusing on the strategic work that is much more valuable to the business.

Increasing volumes

As mergers and acquisitions have hit historic highs in recent years, this has inevitably coincided with a growth in DDQs, with a number of involved parties understandably requiring maximum transparency in the midst of a progressively uncertain economic landscape.

Bearing similarities to the evolution of side letters, another key challenge for legal teams, DDQs are not only consistently increasing in volume, but are also becoming more complex too.

According to a 2022 survey of over 600 fund managers, nearly 70% of investors are now requesting custom DDQs, which means that for legal teams, the amount of different questions they need answers for just continues to rise.

Asking new questions

A lot of this added complexity is reflective of investors’ shifting priorities, where there’s now much less focus on specific investment-related factors within DDQs, in favour of aspects like sustainability, diversity and cybersecurity, all of which fall under the broader Environmental, Social, and Governance (ESG) category.

There’s no disputing that ESG has become the foremost concern of investors, leading to a huge spike in ESG-focused DDQs, with a 76% increase reported in the same 2022 survey.

This additional scrutiny has resulted in a growing number of funds divesting themselves of companies that aren’t a good cultural fit, with ESG-related elements often being the key factor in their decision-making.

Whilst answering DDQs has always been a slow, repetitive process, their growing volume and complexity, combined with new lines of questioning moving away from traditional areas of concern for investors, has only increased the administrative burden they place on legal teams.

However, because they are so critical to the due diligence process, legal teams have no choice but to dedicate a considerable amount of their time to ensure DDQs are being answered properly.

Though they may not be able to free themselves of this key responsibility, with the help of AI-powered technology, there is an exciting opportunity to ease the burden and eliminate the tedious, manual aspects of answering DDQs, so that legal teams can unlock time to focus on higher-value work.

AI-powered search for DDQs

Our Query module is a powerful, searchable document repository that harnesses the comprehensive capabilities of AI to help users find the documents, paragraphs or provisions they’re looking for in seconds.

Any document format can be uploaded into Query, where large language models (LLMs), fine-tuned for legal, will read and label each document according to a set of pre-approved custom tags tailored to the user’s requirements.

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Get answers in seconds

Once this is complete, Query will serve as a single source of truth, enabling legal teams to locate important information buried in their documents with just a few clicks. As LLMs are excellent at processing natural language, users can utilise Robin, our AI contract copilot, to answer specific questions about their documents, such as “do I have any contracts that contain ESG policies?”.

When considering how long it typically takes legal teams to manually search through their old documents to locate relevant answers to fill in DDQs, a tool like Query is critical to streamlining and simplifying this frustratingly tedious routine task.

Instead of committing valuable time to another lengthy reading process or worse, subjecting themselves to writing out the same answers over and over again, legal teams can use Query to search across their document database and instantly find the information they need to answer their DDQs.

Turn your DDQs into data

Users can apply a huge variety of filters to their search, such as the type of question, the provider of the DDQ, the date it was created, or any other property they feel has relevance to the question they need answering. Equally, users can search by using natural language queries, which our LLMs will process and then turn into distinguishable filters related to the DDQs.

After they’ve performed the search, the LLMs will draw out any data across all the documents that matches up with the search parameters, and present it to the user on-screen. Alternatively, users can just ask Robin to find the data they need, where it will promptly read through their documents, find the necessary data and bring it into the chat interface.

Ultimately, whichever method they choose, the user can read through the results, find the content they need, copy the text and then add it to their DDQ in just one click.

A new way of answering DDQs

We understand that answering DDQs can be tedious, frustrating and time-consuming for legal teams.

By using Query, they can solve the challenges of DDQs and make a considerable difference in a number of key areas, with outcomes such as:

• A single source of truth ensuring that all documentation is stored in a powerful, searchable repository
• Visibility and oversight across all documentation
• Enhanced consistency and accuracy in responses by finding previous answers
• Accelerated completion of DDQs by having all the information at their fingertips
• Efficiency and productivity unlocked in legal teams by removing the time-consuming aspects of tasks
• Locating key information in a matter of seconds using natural language