Data rooms—share and asset purchases

Published by a ��˾��ҹ�� Corporate expert

Practice notes

Data rooms—share and asset purchases

Published by a ��˾��ҹ�� Corporate expert

Practice notes

This Practice Note, which applies to both Share purchase and asset purchase transactions, explains:

•
the differences between a physical Data room (a room filled with documents in a set location) (PDR) and a virtual data room (an online data Repository to which documents are uploaded) (VDR) and the factors involved in choosing which of the two to use
•
a summary of the key organisational issues for the seller and the seller's team of advisers to consider when setting up a data room, including how to decide what to include and how to organise the data room, and
•
the documentation which should be drafted by the seller/seller's advisers and executed by those accessing the data room (namely a Confidentiality agreement and data room rules)

Different data room procedures will apply depending on whether a PDR or VDR is being used, but the rationale for setting up a data room is the same in both instances.

It will be important for the seller to identify appropriate senior individuals within its/the target's organisation to provide the documents

Jurisdiction(s):

United Kingdom

Key definition:

Data room definition

What does Data room mean?

As part of the due diligence and disclosure process in a share or asset sale, a physical or virtual space set up by the seller to make available legal, commercial and financial information relating to the target company/target business for review by prospective buyers. It is commonly used in an auction process where there will be a number of interested parties, but it is now used in a broad variety of transactions (especially because of the convenience of a virtual data room). A physical data room (PDR) is a room filled with documents and files. It would typically be set up in a room at the offices of the seller’s solicitors or financial advisers, rather than at the seller's offices. This is to avoid disruption to the seller's business on a day-to-day basis and to keep the transaction confidential from employees. Where a transaction has a multi-jurisdictional element, a number of PDRs can be set up at any one time in each local jurisdiction. A virtual data room (VDR) is an online (often cloud-based) repository and document sharing platform which is set up by the seller to give potential buyers and their advisers access to the documents and information that they need to conduct their due diligence exercise in relation to the target company/target business.

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