The Data Room

The Business Exit Planning process had a number of key milestones.  The Due Diligence Period is a critical stage, and it is vital that it go both smoothly and with the least amount of disruption to the day to day operation of the business.  Advance planning can achieve this desired result.  Well before a buyer for your company is even identified, you will need to prepare and organize documents for the future buyer to view. Best practices dictate that these due diligence documents be located in what is commonly referred to as a Data Room.

Control over the disclosure of due diligence information is crucial to the business exit process. This is, after all, your information and nobody has a right to see it until you give the approval. The Data Room contains many of your company’s important and confidential documents such as customer contracts, supply contracts, leases, lawsuits, articles of incorporation and other organization documents, insurance documents, 401K plans, financial audits for the past four years, management reports, employment contracts, recent industry analyses and other types of information, including trade secrets, that makes your company unique.  Therefore, disclosure of these documents should be in strict adherence to a system that you create in association with an attorney and members of The Success Team.

You have options when it comes to the physical location of your Data Room. Some of those options might include the following, all of which have benefits and drawbacks that should be discussed with your team:

  • your company’s location
  • an attorney’s office
  • a virtual data room

The contents and location of your Data Room involves a considerable amount of forethought and collaboration with the appropriate individuals. Creating a Data Room is an important part of the exit strategy process. If you are considering the sale of your business, contact me and we can talk about next steps.

photo credit: laptop and stethoscope via photopin (license)

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