A digital due diligence data room contains all financial documents, legal documents and business documents relevant to the business transfer. Such a data room is indispensable when you want to sell your business. Because:
When selling a business, you as the seller have a duty to provide a potential buyer with all the information necessary to make the decision of acquisition. If you have a well-designed data room, you can simply give the buyer (and his advisors such as M&A advisor, lawyer, accountant) access to the documents. Then, the buyer can fulfill their duty to research the transaction and have easy access to all the digital information.
Setting up a data room
Setting up a data room does not happen overnight. Setting up a data room properly takes time and must be done carefully. All relevant information that a buyer needs to know in the transaction must be included in the data room and indexed. In addition, the seller often has additional questions to which answers are provided. This information is also processed in the data room. Therefore, it is better to hire an outside party to compile the information and the complex procedures surrounding the data room.
What information should be placed in the data room?
A well-designed data room will be tailored entirely to the company but will contain at least:
- General company data
- Financial statements, current financial information
- Overview personnel and organization
- Pension overview
- Tax overviews and agreements
- Overview of legal documentation and agreements
- Other relevant information
Preventing claims and proceedings
The data room is not only an important tool in the due diligence and sales process, but also to cover claims and procedures after the transaction. It often happens: the buyer claims damages afterwards because the transaction turned out differently than he had expected. With a well-documented data room, it is easy to show which information has already been provided on the basis of which a possible claim can be averted. This indicates the importance of the data room being as complete as possible.
Don’t skimp on the data room
There are several providers of virtual data rooms. Despite all the advantages, they still sometimes skimp on the data room. The cost of a good data room is proportional to the data put into it and the length of time it is made available. This is one of the reasons why information is sometimes provided in addition to the data room. But because it is difficult to determine afterwards what information has or has not been provided, this is not a good strategy for possible claims.
Would you like to spar with us about a sales process and setting up a due diligence data room?
Please contact us: mvijverberg@cliftonfinance.com