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The New Data Room

September 13, 2016

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In the sale of a business, it is often the case that both the buyer and the seller will engage professional advisors to assist in the sale. Where advisors on the buy side are retained to perform due diligence procedures, advisors on the sell side are engaged to provide assistance to the buyer team in order to facilitate a timely transaction at the highest possible price.

Virtual Data Room

Throughout the due diligence process, the buyer will request certain documents from the seller to obtain information about a variety of issues that may impact the deal. An organized seller would typically prepare all the documeprofnts in advance to ensure timely progression of the transaction. It used to be the case that paper copies of the documents would be physically carried into a boardroom in boxes organized in some logical fashion. This became known as the “data room”.

Given the significant advancements in technology, most documents (including financial, legal and operational information) are now available in electronic format, which can be easily accessed over the internet. However, there is much concern around the significant need for security measures surrounding confidential and sensitive information. In response to these concerns, virtual data room software has become widely used to store documents in a secure manner. The data room administrator (typically the sell side advisors) will be able to grant access to approved individuals and manage what data (and for how long) a particular party is able to access in the data room.

In an ideal situation, using a well-managed virtual data room, the buyer and their professional advisors will be able to access critical information from anywhere around the world, granted they have internet access, while protecting the seller’s confidential data. This convenience eliminates issues surrounding scheduling conflicts, time zone differences, physical space requirements and administrative time spent photocopying, printing, etc. This results in a due diligence process that is faster, safer and cheaper, all of which greatly improves the chance of a deal closure.

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