Data Room
A secure repository where confidential documents are stored and shared with potential buyers during due diligence.
Full Definition
A data room is a secure environment (virtual or physical) where sellers store confidential business documents for review by potential buyers during the due diligence process.
Virtual Data Rooms (VDRs): Modern M&A transactions almost exclusively use virtual data rooms, which offer:
- 24/7 secure access from anywhere
- Granular permission controls
- Activity tracking and audit trails
- Q&A functionality
- Watermarking and download restrictions
- Index and search capabilities
Typical data room structure: 1. Corporate documents (constitution, registers, minutes) 2. Financial information (accounts, management reports, forecasts) 3. Commercial contracts (customers, suppliers, key agreements) 4. Employment (contracts, policies, pensions) 5. Property (leases, titles, surveys) 6. IT and IP (systems, licenses, patents) 7. Legal (litigation, regulatory, compliance) 8. Tax (returns, correspondence, planning)
Data room management:
- Seller's solicitors typically coordinate population
- Staged disclosure may be used (e.g., financials only to shortlisted bidders)
- Q&A process managed through VDR platform
- Disclosed documents form basis of disclosure letter
A well-organised data room accelerates due diligence and builds buyer confidence.
Related Terms
Due Diligence
The comprehensive investigation and analysis of a target business before completing an acquisition.
Confidential Information Memorandum (CIM)
A detailed document providing comprehensive information about a business for sale to potential buyers.
Disclosure Letter
A letter from the seller disclosing matters that qualify the warranties given in the sale agreement.