data room

How to sell a business with a virtual data room

By most measures selling a business is a complicated transaction. A virtual data room helps the seller of a business eliminate confusion, save time and ensure all prospective buyers have equal access to sales documents.

If you’re thinking of selling your business, booking a virtual data room should be the first point of order.

What is a Virtual Data Room?

A data room is a location that stores private, sensitive information. In years gone by, this would be a physical room with secure entry and exit for authorized personnel. Documents contained within could be read, maybe copied, but not removed.  A data room is used in situations such as a merger and acquisition transaction when total confidentiality is required. In the past, physical data rooms were expensive to setup, manage and control.

Today, it is possible for organizations of all sizes to set up and manage a data room but this time it can be done online with a virtual data room. In an online version of a data room all documents are held in a secure online location with access controlled via user ID.

A data room is a way for companies to store confidential information related to a business sale and ensure all purchasers have equal access to the information.

How does a data room assist the sale of a company?

One of the key aspects of a company sale is the due diligence process to be undertaken by all buyers. All documents relating to the sale need to be organized and easily accessible.  All purchasers need to know they all have access to the same sales information as other purchasers and that no-one has an advantage from “inside information”.

A virtual data room provides a single location for all purchasers to access the documents relating to a sale. Using a secure website and unique ID and password (issued by the seller), each purchaser can review the sales documents. The data room helps save time for purchasers because multiple document types, formats, versions are stored digitally and in one location.

A purchaser has only to logon to the virtual data room to see all documents – at any time of day. This is a big improvement on the limited access purchasers would have had to a physical data room which would most certainly not be available 24 hours a day!

This single location helps the seller prepare information for sale. All documents will be stored in one place and all documents must be digitized. This helps standardize information access and prevents different versions, paper copies, altered versions of documents causing confusion during the sales process. This in turn saves time for all parties to a transaction.

Setting up a Virtual Data Room

Prepare a list of all documents that need to be presented as part of the sale. Plan how to organize and group these documents. For example; keep financial documents in one group, legal documents in another, HR documents in a different group and so on.

Collect all the documents relating to the sale in digital format. This may involve scanning some documents. Ensure only the latest versions of documents are collected and saved in digital form.

A virtual data room is typically accessed via a standard web-browser and requires no special software or computer to access the information within. A seller can control access to the data room from an easy to use control panel.

The seller (or their agent) uploads the documents to the virtual data room and issues secure user IDs and passwords to qualified buyers for them to review the company documents within the allotted timeframe.

A data room is a proven way for business sellers to manage and present documents for a buyer’s due diligence process. With the advent of the internet, online data rooms give companies of all sizes the opportunity to benefit from a process that previously only big business could afford.

If you’re looking to sell your business, a virtual data room will save you time, reduce the administrative overhead and help you get the best price for your business.

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