Whether you’re out looking to raise capital or thinking about selling your company, a data room can be a big help to your potential buyer or investor.  By data room, I’m referring to where you have all the copies of the due diligence materials available for an investor or a buyer to come look at.

One decision to be made is where you will keep this particular data.  It could be in a room in your office or outside or it could be a virtual data room where this information is stored electronically, perhaps in some folder or site on the internet or through your company’s server.

Here are some thoughts to consider as you put together this data room:

1.  Start assembling the information.  By having a data room and getting a jump on assembling the information, you can be far ahead of many other companies.

2.  Have an advisor to tell you what should be included in the data room.  This could be an investment banker, m&a advisor, business broker, financial intermediary, attorney or a financial consultant.  It most likely will be the person that is functioning as the quarterback for your particular project.

3.  Have the information be accurate and consistent.  You score points if the information is tight.  For example, does your net income tie out to your balance sheet?  Are your historical financials incorporated in with your financial projection?

4.  Have it be easy to follow.  You can be pretty used to looking at the information as an insider.  You have seen this information many times over and, perhaps, see it on a periodic basis, such as monthly.  Give it a test though.  Look at it from the eyes of an outsider.  Would it be easy to follow?  Do you need to put in some assumptions, perhaps a table of contents, or perhaps other guidelines like a flow chart to walk somebody through?

5.  Organize it into logical groups.  Keep the groupings neatly together to make it easy for your target investor or acquirer to see that all the materials in an area are together and that things are complete.
6.  Make it pleasant.  If you’re having it in your office, put it in a location or spot that makes is pleasant to do the work.  Have access to refreshments, facilities and other things that somebody would need during their time in the room.

One of the big steps in the process can be having the data room together, whether physical or virtual.  Your data room creates a big impression.  It can add value or take away value from what you are trying to accomplish.  That could get reflected in the valuation, whether done for an acquisition or for the basis of establishing a pre-money valuation before somebody invests in your company.  Jump on the data room early, fill it piece meal if need be, and you can have a big step out of the way in the process.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
Bringing new insights on results and maximizing company value