If a company plans to do an IPO or to complete an M&A deal, it has to exchange massive volumes of documents with potential buyers. These documents are classified in nature and must be protected and easily accessible to bidders on the deal. A virtual dataroom allows buyers to view these documents without the burden of managing large amounts of paperwork or commuting to a company. A reliable VDR protects competitors from gaining access to sensitive information.
In general, the data room contains documents regarding financial due diligence including balance sheets, income statements and other reports. In addition there will be intellectual property due diligence documents that list the company’s intellectual assets, such as trademarks and branding. Due diligence can also include a section about tax due diligence, which is crucial to identify and understand the potential tax liabilities of the business.
Some companies also upload whitepapers and pitch decks to their data rooms. These documents give a concise outline to potential investors of the problem that the company is tackling. They also explain how the company is uniquely positioned to solve the problem, and the strategy to address it. Founders can use their data rooms to provide details on the current fundraising process. These files include legally drafted documents such as term sheets, capitalization and tables. A high-quality data room should include a set of reporting tools that provide administrators with an at-a-glance view of user activity, which includes which documents have been reviewed and when.