As you navigate the complexities of mergers and acquisitions, it's important to understand what a data room is and what it should contain. A well-organised data room not only streamlines the due diligence process, but also builds trust with potential buyers, giving you a competitive advantage.

Cashing in on your years of hard work can be an incredibly rewarding experience, but there’s a lot of work to be done including finding relevant advisors, engaging (and negotiating) with buyers, undertaking due diligence and then completing legal documents

One of the best things you can do to accelerate the process and save time and money during the due diligence phase is to build and manage a virtual data room.

But what is a data room, and what should be in yours?

What is a data room?

While it might sound like something from a spy thriller, a data room is essentially a secure space where sellers can store sensitive documents and information to easily share with potential buyers for merger and acquisition transactions. In most instances, a data room for a potential acquisition often requires more detailed documents than funding rounds because you are selling the entire company rather than a minority stake. Therefore, buyers need deeper transparency into the business.

Once a potential buyer has access, they can browse through the documents alongside any appointed advisors in order to discover what they need to know about your business before possibly proceeding to make an offer and then completing a deal.

The importance of data rooms in mergers and acquisitions

In 2021, the total transaction value of mergers and acquisition deals around the world reached an all-time high of $5 trillion, surpassing the previous record set in 2007. The surge in dealmaking activity was driven by a number of factors, including low interest rates and ample liquidity.

The surge in dealmaking was supported by the increased use of virtual data rooms rather than physical data rooms, post-COVID. It is more common practice now for buyers and sellers to turn to a range of digital tools in order to streamline their M&A deal processing. Foundy’s end-to-end platform for startup acquisitions has been built to democratise access to such digital tools to make dealmaking more affordable, efficient and rewarding.

What are the benefits of a data room? 

Data rooms are secure and confidential, which makes them ideal for storing sensitive information. They streamline the due diligence process in mergers and acquisitions and are used by hundreds of businesses globally. 

Data rooms offer several benefits, including: 

Accelerated M&A process

There’s a lot of paperwork to sort through when you sell a business. Data rooms speed up the M&A process as sellers can easily drag and drop all of the relevant documents into shared files and label folders accordingly.  Both parties can instantly access the documents without needing to physically travel to the sellers location or vice versa. 

Plus, some data rooms make it easy to track who has accessed which documents and when, so sellers can more gain insight into a buyer’s potential level of interest in completing a deal. 

Enhanced security

In today’s climate of increased security threats, taking measures to protect your data is more critical than ever. Data rooms are an effective way to enhance security as only authorised users have access, all information is encrypted, and access is tracked.

This makes it easy to identify any potential security breaches. 

When should you create a data room?

When you’re ready to sell your business and start advertising to potential buyers, you’ll want to have a data room set up and ready to go. 

A data room allows buyers to understand your business better and make a more informed decision about whether they want to buy. It also streamlines the due diligence process, saving everyone time and hassle.

If you can, it’s a good idea to start putting together your data room as part of your exit strategy from day one. 

Having a data room shows that you’re organised and prepared, making a good impression on potential buyers.

What to include in your data room

Creating a system that works for you and your team helps to keep your data room organised and up-to-date. 

When in doubt, err on the side of including too much information rather than too little so buyers feel they have all the information they need to make an informed decision.

Here are some of the most common things you should include in your data room:

Company documents

• Articles of incorporation

• Investor rights agreements

• Voting agreements

• Stock purchase agreements

Financial information

• Profit and loss statements

• Projections

Marketing

• Brand guidelines

• Pitch deck

Market research

• Competitive analysis

• Market studies

• Information on primary and local competitors

Sales

• Sales pipeline

• Sales process

Staff

• Employment contracts for all staff

• Any ongoing recruitment

• Details of contract workers and agencies

• Details of all employees, roles and salaries

Intellectual property

• Trademarks

• Patents

Speed up your business sale with Foundy

By creating a virtual data room, you can speed up the sales process of your business. 

But if you’re going through the traditional M&A process, it could still take up to a year to complete the sale. Inefficient M&A processes can kill or likely harm deals which creates inherent risk for sellers, including their shareholders. 

Foundy is changing that. 

Foundy is the go-to acquisition marketplace where you can sell your business in as little as 30 days. 

The M&A process is stuck in the past. Foundy removes the obstacles and provides sellers and buyers with a simple digital solution. 

With Foundy, you can: 

• Create a free, anonymous seller listing

• Access hundreds and very soon thousands of potential buyers 

• Speak directly with interested parties via instant chat

• Provide buyers with key metrics and highlights easily

• Very soon you will be able to find other helpful digital tools such as a professional M&A advisor directory, amongst others

Ready to discover your business's value?
Running a business and deciding to sell or acquire another can feel like having two full-time jobs. While some business owners thrive on the excitement of buying and selling on their own, many, including myself, benefit from collaborating with experts who bring more sector specific experience. However, it’s important to note that working with M&A advisors is not a one-size-fits-all solution. Hence why we built our advanced portal and Find An Advisor programme to empower you with the tools, education and relevant expert support to help you navigate the end-to-end process and secure a higher valuation.

Join Foundy today to receive offers and negotiate the best deal for your business.

Check out the free calculator on our pricing page, which shows you the six to seven figures in additional share value Foundy can provide your business.

No matter where you are on your business journey, connect with Foundy to access the resources needed for a smoother acquisition or sale process.