Data room: Advantages and possibilities

Experience from M&A projects suggests that all relevant financial figures, asset lists and existing contracts and insurance policies, as well as any meaningful information about the commercial property, should be completely put together in the preparatory phase and stored in a structured manner in a data room.

Until the 2000s, it was common practice to reserve a lockable room in the premises of the company to be sold for the purpose of displaying all information about the company and making it accessible to prospective buyers for a defined period of time after signing appropriate confidentiality agreements. This enabled prospective buyers to obtain detailed information about the company.

In the meantime, virtual data rooms have become common. Their use is offered by some corporate intermediaries. In some cases, corporate intermediaries also offer the service of filling a data room with files in a structured manner and managing access to the data room.

Make sure that you use a data room that is created securely. It should be possible to verify the authenticity and integrity of the website through which the data room is accessed by means of a cryptic procedure and it should be proven by means of an SSL certificate.

Access to the data room should only be possible via personally assigned access data. In this way, you can exclude the possibility of unauthorized persons “entering” the data room. It should also be possible to track which files authorized persons have viewed and when. Whether you want to take advantage of the option to additionally encrypt the files posted to the data room is something you should consider. Such an additional hurdle can be very inconvenient for users. Provided that an SSL certificate is available and interested parties can only be unlocked with personal access data, there is actually sufficient protection against misuse.

The option to suppress downloads and local saving also does not contribute to a fluent data check. If you can’t save, you’ll take screenshots that you can’t prevent. As an effective measure against abuse, sign enforceable confidentiality agreements with your prospective buyers before giving them access to the data room.

Make sure the data room is filled with all relevant and up-to-date information before you go to market with your company. This will save prospective buyers waiting time later on when they can look at other properties to buy.

Of course, you also need to update the data room during the ongoing sales process, which can go on for several months. For example, as soon as you have current business assessments, tax assessment notices or customer contracts, you should post them in the data room.


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