Acquisitions involve a lot of communication and information exchange. To keep track of everything, you need a “data room” – a virtual folder where you and buyers, advisors, and anyone else helping with your acquisition can share critical information. It’s as simple as creating a Google folder, copying your data across, and then granting access.
With a data room, you needn’t worry about losing email attachments or sifting through reams of paperwork to find something a buyer wants. Instead, you upload everything to a virtual workspace that you can share with a link. You then have a single source of the truth for all legal, financial, and operational docs and can see your startup as a prospective buyer would.
But a data room is only as good as the data you put inside it. Don’t leave building your data room until the last minute and risk missing something that delays your acquisition. You might also need to liaise with your CFO and COO to ensure the records are accurate and up-to-date. Start building it now, while you have time to gather everything together.
What to Include in Your Acquisition Data Room
Marketing Materials
This is everything you or an M&A advisor needs to market your startup. It includes a non-disclosure agreement (NDA), an information memorandum (a legal document outlining the benefits, risks, and conditions of acquiring your startup), a teaser or introduction to your acquisition (a 1-2 page summary introducing your startup to the market), and so on.
Financial and Tax Information
This is one of the most important areas of your data room, so pay it special attention. Include audited statements for at least three years, including current budgets, forecasts, and financial models as well as federal and state tax filings, capital leases, schedules, and any other financial commitments such as inventories, capital expenses, and depreciation.
Legal Documents
Ask your attorney for your digital minute book (a compilation of all legal business records). Also include your company share certificates, resolved legal cases, contracts, intellectual property (patents), and so on. Your startup will come under intense scrutiny during legal and financial due diligence so it makes sense to focus on these areas of your data room first.
Human Resources
Prospective buyers want to know the people who helped your startup become what it is today. Include your employees’ resumes, salaries, pension details, equity percentages, benefits, and performance records. Buyers may use this data to replace lost employees post-acquisition or to tempt them to remain.
Private and Confidential Data
Any ongoing issues material to your startup such as pending legal disputes or industrial action should also go into your data room. How much you share is up to you, and you should only share the most sensitive data upon receipt of a signed NDA, but the law requires you to disclose anything pertinent to the sale. Include pending deals, legal cases, and contract disputes.
Inventory of Assets
Include a list of property and assets along with mortgages, loans, leases, and any environmental or regulatory support. Also include IP documentation such as patents, patent applications, trademarks, copyrights, domain registrations, software licenses, and any contracts outlining proprietary IP. (There is some overlap with legal here but the important thing is that the documents are easy to find.)
General Contracts
General contracts are the glue that binds your operational model together. As a result, the buyer will want to vet these contracts to ensure they’re watertight. Include all joint ventures, vendors, customers, and distributor contracts as well as sales, employment, and credit agreements that prove your business today is built upon solid contractual foundations.
Customer and Vendor Lists
The quality and volume of your customers as well as acquisition and retention plans are critical to any acquisition deal. Include key metrics (demographics, personas, and so on), sales commission plans, reseller information, lists of products and services, and marketing materials. Essentially a list of everyone you do business with and the details of that relationship.
Other Items
Anything else not listed above but that’s still pertinent to your acquisition should also go into your data room. This includes things like government permits and licenses, insurance contracts, and current and past litigation settlements. If you’ve included these things under another category, no problem, you can skip this one.
Data Room Checklist
Below is a simplified checklist that’ll help you create a data room with ease. Or, use Acquire’s free data room template. There’s no right or wrong way to structure your data room, so long as you do so logically and include all the relevant information discussed above.
Good luck!
| Marketing Materials | |
| Financial and Tax Information | |
| Legal Documents | |
| Human Resources | |
| Private and Confidential Data | |
| Inventory of Assets | |
| General Contracts | |
| Customer and Vendor Lists | |
| Other Items |
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.
