Due Diligence to Done Deal: How Data Rooms Facilitate the M&A Process

By Kevin T. Lamb

In today’s world of complex mergers and acquisitions (M&A), more and more companies and their professionals are utilizing data rooms to help facilitate the M&A due diligence process. In M&A transactions, the objective of due diligence is to provide a buyer with essential information so that they can decide if they want to acquire a target company and at what price. In order to facilitate the process, the selling company will often utilize a data room containing relevant target company information.

At its simplest, a data room is nothing more than a secure repository of business-related information that enables the parties and their advisers to safely compile, access, and exchange documents and other sensitive information. Although data rooms can be either physical or virtual, the use of virtual data rooms is now utilized in an overwhelming majority of M&A transactions due to their cost efficiency and remote accessibility.

Structuring a Virtual Data Room

A virtual data room is a centralized, secure online platform that fulfills the same purposes as a physical data room and is intended to make the due diligence process more secure, as well as time- and cost-efficient. A virtual platform permits more control over the due diligence process in that it protects against third parties obtaining unauthorized access to sensitive information or documents, and can track all usage activity through the use of customized watermarks, which identify the user and the documents accessed. Virtual data rooms can be relatively small or extremely large, depending on the complexities of the transaction and the parties’ needs. Both internal and external groups are typically granted access to the virtual data room and may be granted the authority to upload and download documents to and from the virtual data room.

Virtual data rooms are critical for complex M&A transactions where several potential buyers may be granted simultaneous confidential access to massive amounts of documents. Once fully populated and configured, a well-organized virtual data room will contain multiple folders of information with an index to separate transaction-specific documents such as the letter of intent, nondisclosure agreement, due diligence checklist, as well as general corporate information and records, financial information, legal information, human resources information, etc., and will vary according to the specifics of the transaction.

Evaluating Virtual Data Room Providers

In midsized to large M&A transactions, a third-party virtual data room provider is typically utilized. Typically, the seller “hosts” the virtual data room and selects the provider. To effectively select a virtual data room provider for an M&A transaction, the seller should primarily focus on security and ease of use.

Pricing can often vary substantially based on the scope of the M&A project, so it is imperative that a seller thoroughly evaluate all potential virtual data room providers and compare their various pricing models. Given the fact that choosing the right virtual data room provider is crucial for a successful and secure M&A transaction, it is imperative that a selling company clearly define its needs, taking into consideration what the primary use of the virtual data room will be; the scale of the project, including an estimated number of users that will require access; the types of documents that will be stored; how much storage capacity it expects to need; and any unique compliance requirements. It is important to say how long the project is expected to take, as this may have a significant impact on pricing models.

Pricing models can vary widely and can include per-page fees, per-user fees, storage space fees, flat monthly fees, and annual subscriptions. In addition, pricing models may include additional setup costs, overage charges for storage or the number of users, and project archiving or extension fees, with perhaps additional costs for use of premium features or support. It is important to negotiate with the provider to obtain a customized virtual data room that meets the specific needs of the transaction at an acceptable price. Oftentimes, pricing in this very competitive marketplace is highly negotiable.

Final Thoughts: Human Oversight Matters

The end goal here is to find a virtual data room provider that will help the seller manage and execute the M&A transaction smoothly and securely at a competitive price. Once the provider is selected, it is also customary to assign administrative rights to at least a couple of attorneys who are actively engaged in the transaction to oversee the virtual data room throughout the M&A process. These appointed administrators act as gatekeepers who control access, manage security, grant access to upload or download documents, and organize the documents in the data room.

When properly structured and maintained, a virtual data room will ensure a smooth exchange of information and is an invaluable tool to today’s M&A professional.

Jones Foster senior counsel Kevin T. Lamb has more than 40 years of corporate legal experience across a broad range of industries. Lamb’s practice includes mergers and acquisitions, corporate transactions and commercial law, corporate governance, bankruptcy, corporate restructuring and creditors’ rights, venture capital and private equity, real estate transactions, and senior and subordinated debt financing.

Reprinted with permission from the August 29, 2025, edition of the Daily Business Review © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

The information provided in this article does not, and is not intended to, constitute legal advice; it is for general informational purposes only. No reader of this article should act or refrain from acting on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction to ensure the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.