So, you are about to embark on a transaction. A data room is proposed as a hassle free and convenient way to share documents and information between the parties – so far so good. You collate, name and number the documents and the end result is (hopefully!) a well ordered data room masterpiece. Time to sit back, relax and leave the other party to enjoy reading it all… Well, not quite. Here are a few points to consider before agreeing to hit the ‘go live’ button to avoid winding up in the data room ditch.
Though it may be tempting to go live as soon as possible, and we all know there is always a time pressure to do so, in the long run it will save time, costs, and internal resource to provide as complete information as possible upfront. Provide patchy information in the first instance, and expect lots of questions seeking clarification in response. A 24 hour delay now could save days of additional work later – best not to get bogged down with that.
Confidentiality is always key. The other party may be a competitor, an investor with competing interests or commercially you may simply need to keep things under wraps until completion. It is likely that a non-disclosure agreement (an ‘NDA’) will have been signed, and this will have been reinforced by further terms agreed to upon accessing the data room. Let’s be honest though – most users will probably hit “accept” without reading these terms, and once information has been leaked, it cannot be un-leaked. So what other practical steps can be taken to protect your position?
- limiting user access – you may want to consider:
- disabling printing documents;
- disabling saving documents; or
- allowing printing, but with watermarks showing user information.
The first two options prevent new physical copies being created, lessening the risk of copies falling into the wrong hands. The need to destroy documents is also eliminated. Practically though, number three tends to be more agreeable – no one likes to read things on screen!
- staged release of information – another tactic is to withhold key confidential information until later in the process. The scope of what is material will depend on your individual business. You might consider:
- withholding certain information until the other party has shown sufficient good faith (and employed sufficient resource!) that you are confident in their commitment to completing the transaction; and
- being particularly cautious in a bidder context – beware of nosy, but otherwise disinterested, competitors!
3. Further enquiries
Your work is, sadly, unlikely to be done. Further enquiries are a normal part of the process. Setting out a sensible protocol and time frame in advance for collating and answering these is important to maintain goodwill between the parties and keep the process moving. More importantly though, you still have a business to run! Ad hoc questions are generally to be avoided. In some circumstances though, a Q&A section of the data room may be appropriate where the other party can ask you commercial questions. Remember to set expectations though – you don’t want to be expected to answer a daily deluge!