Before investing in or acquiring a company, sophisticated investors and acquirers generally engage in an extensive due diligence process. Companies often spend significant time compiling the necessary information, including, digging through old files, contacting vendors and other third parties to obtain copies of agreements, and contacting attorneys and accountants to obtain files. A complete and well-organized virtual due diligence room will help instill confidence and fast-track the due diligence process.
Regardless of whether there is a pending transaction, having a virtual document repository, and keeping it up to date, will save countless hours, when documents or information is needed for general business matters such as loans, tax returns, securities filings, and other transactions. This blog sets forth a simple roadmap for creating a virtual due diligence room.
Virtual Data Room Services.
There are many services that offer secure virtual due diligence rooms which permit you to add and remove participants and set their access rights. We, however, have found Dropbox and Google Docs to be the simplest.
Organization
The following sets forth an example of the folder set up for a virtual document repository.
Note: Italicized Items represent documents within a folder, but not a separate sub-folder.
- Corporate Documents
a. Charter Documents (Articles, Bylaws, EIN, Franchise Tax Filings)
b. Minute Books
c. Stock Options
d. Securities Offerings
i. Friends & Family Round
ii. Series Seed
iii. Series A
e. List of Current Officers & Directors
f. Capitalization Table & Stock Ledger
2. Employees and Consultants
a. Employment Agreements & Offer Letters
b. Work Product Assignment & Confidentiality Agreements
c. Bonus Plans
d. Consulting & Advisory Agreements
3. Agreements
a. Vendor Agreements
b. Customer Agreements
c. Branding & Ambassador AgreementsJoint
d. Venture & Strategic Partner Agreements
e. Non-Disclosure Agreements
f. Leases
g. Broker Agreements
4. Intellectual Property
a. Licenses
b. Schedule of Patents, Trademarks, Domain Names & Social Media Accounts
c. Patents
i. Patent 1
ii. Patent 2
d. Trademarks
i. Trademark 1
ii. Trademark 2
e. IP Assignments Agreements
5. Litigation
a. Litigation Summary
b. Matter A
c. Matter B
6. Marketing Materials & Business Plans
a. Business Plans
b. General Marketing Materials
c. Case Studies/Customer Testimonials
d. Marketing Data
7. Financial
a. Pro Forma Projections
b. Financial Statements
8. Insurance
a. Product Liability
b. General Business
c. D&O
d. Employee Benefit Plans
The information contained in this article is strictly for educational purposes and is not intended to be legal or tax advice or to be relied upon by anyone without doing their own research, and consulting with legal and tax advisors.