When a company wants to complete an M&A or IPO and IPO, it must exchange a large number of documents with prospective buyers. These documents are considered confidential in nature and should be kept safe and accessible to bidders of the deal. A virtual data room allows buyers to access these files without the need to manage the hefty amount of paperwork or travel to a business’s offices. A good VDR stops competitors from accessing sensitive materials.
In general, the data room will contain financial due diligence documents that are audited and include balance sheets and income statements, as well as other reports. There will also be files for intellectual property due diligence that will detail the tangible assets of the company including trademarks branding, trademarks and so on. This kind of due diligence may include an element of tax due diligence that is required to discover and understand the tax liabilities of the business.
Some companies also upload whitepapers and pitch decks to their data rooms. These files provide the potential investor with a brief outline of the issue the company is solving, the way they are uniquely positioned to solve the problem and what they intend to do about it. Founders can use their data room to provide information about the ongoing fundraising process, including documents that have been signed by lawyers and term sheets. A well-designed data room will come with a set of reporting tools that allow administrators to have a quick glance at the user’s activity. This includes which documents were viewed and at what time.
