What Should Be in the Online Data Room?

Shery – July 18, 2018

Typically, everything material about the business of the selling company will need to be included in the online data room, including key contracts, intellectual property information, employee information, financial statements, and much more. Below is a comprehensive list that sets forth the types of information that may need to be included in an online data room. (See also 20 Key Due Diligence Activities in an M&A Transaction.)

Note that this is a sample list and additional documents may be appropriate in the context of a particular company or transaction. Do not include any attorney-client privileged documents into the data room. The information here should generally apply to the company and each of its subsidiaries and predecessors. Also, consider whether any information that is highly confidential (e.g., customer pricing) should be redacted. Consider the sensitivity of any term sheets or letters of intent from potential acquirers.

1. Basic Corporate Documents

Certificate of Incorporation and Amendments thereto
Corporate Bylaws and Amendments thereto
List of Subsidiaries and ownership percentage
Subsidiary Certificates and Bylaws
Shareholder Minutes and Consents
Business Licenses
Business Permits
Board Committee Minutes and Consents
List of jurisdictions where Company is qualified to do business, owns or leases real property, or is otherwise operating
Good standing certificate in jurisdiction of incorporation
Franchise tax board certificate in jurisdiction of incorporation
List of current officers and directors

2. Capital Stock and Other Securities

Shareholder List (name, amount, date of issuance, consideration received, common or preferred, etc.)
Optionholder List (name, amount of options, date of grant, vesting schedule)
Warrantholder List
Cap Table
Convertible Note Register
Stock Purchase Agreements
Voting Agreements
Registration Rights Agreements
Management Rights Agreements
Stock Option Agreements
Stockholder Agreements
Stock Certificates
Proxies
Buy-Sell Agreements
Securities law filings and permits
Recap and organization documents, including reincorporations
Disclosure documents used in private placements of company securities
Term sheets signed in connection with prior securities issuances

3. Financial and Tax Matters

Audited Financial Statements
Unaudited Financial Statements
Monthly Financials
Quarterly Financials
Letters from Auditors
Projections and Assumptions/Operating Plans (current)
Federal Income Tax Returns
State Income Tax Returns
Foreign Income Tax Returns
Other Tax Returns/Filings
Reassessment or deficiency or audit notices
Banking Accounts and Signatories
Loans and Promissory Notes
Capital Leases
Security Agreements
Accounts Receivable Aging Schedule
Accounts Payable Schedule
Description of any changes to accounting methods or principles
409A Valuations
Guarantees
Bridge Financings
Inventories: (i) inventory summary by major product as of most recent practicable date; (ii) schedule of consigned inventory; (iii) copies of the Company’s policies for providing for obsolete and slow-moving inventory and summary of obsolescence write-offs and provisions for slow-moving inventory for the last year; and (iv) description of the Company’s methods of inventory control
Schedule of material prepaid expenses and “other assets” as of most recent practicable date
Schedule of property, plant and equipment, and accumulated depreciation broken down into category (i.e., land, buildings, equipment, etc.) for the last year (indicating beginning balances, additions (or provisions), retirements, and ending balances
Cash flow and working capital analysis as of most recent practicable date
Pricing policies, including commission and rate schedules
Product return rate analysis for last fiscal year and current fiscal year to date
Capital expenditure programs for last and current fiscal year
List and copies of all tax sharing and transfer pricing agreements currently in effect (if there are no written transfer pricing agreements, explain the transfer pricing methodology used between affiliated entities)
Schedule of the amount, origin, and status of any U.S. net operating losses or credit carryforwards (including information on any ownership changes or other events to date which might affect such items)
Copy of most recently filed Form 5500 for 401(k) plan
Agreements waiving statutes of limitation or extending the time during which suit might be brought with respect to taxes
Correspondence regarding any tax liens

4. Property and Assets

Schedule and summary of all owned real property
Schedule and summary of all leased property
Real property mortgage and loan documents
Security agreements, pledges, and encumbrances on assets
List of material personal property assets
Documents relating to any environmental matters concerning leased or owned property
Real property leases and amendments and consents related thereto
Personal property leases and amendments

5. Intellectual Property (IP)

Summary of Patents and Patent Applications
Patent Applications
Patents Issued
Summary of contracts where Company IP is licensed to a third party, and actual contracts
Software License Agreements summary
Software License Agreements
Employee Non-Disclosure and Proprietary Inventions Assignment Agreements
Consultant Non-Disclosure and Proprietary Inventions Assignment Agreements
IP litigation summary
IP litigation case filings
Claims or communications against the Company for IP infringement
Claims or communications against third parties for IP infringement
List of open source software used
Trademarks
Service marks
Technology license agreements
IP transfer or sale agreements
IP escrow agreements
Third party non-disclosure or confidentiality agreements (consider redaction of names)
Internal policies to protect IP
List of registered copyrights
List of domain names, with expiration dates
Schedule of mask work registrations and applications
Clinical trial information (for biotech companies)

6. Material Agreements

Summary of Material Agreements
Summary of agreements needing consent in the event of change in control
Material Sales Agreements
Intellectual Property Agreements (see Section 5)
Distribution Agreements
Partnership or Joint Venture Agreements
Leases (see Section 4)
Non-Competition Agreements
Employment Agreements
Change in Control Agreements
Inter-company agreements
Agency agreements
Prior M&A agreements
Investment Banker engagement letters
Indemnification Agreements
Loan or Credit Agreements
Mortgages
Privacy Policy
Terms of Web Site Use Agreement
Other material agreements

7. Customers, Sales, and Marketing

List of customers and key metric information
Form of Sales Agreement
Accounts Receivable summary
Sales Commission Plan
Sales allowances and return policies
Reseller information
Credit and collection policies and processes
Backlog
Sales projections and assumptions
List of products and summary
Product road maps
Marketing materials and sales literature
Product campaigns and launches (summary)
Industry and analyst reports

8. Suppliers and Manufacturers

List of key suppliers and products supplied
Supplier agreements
Original Equipment Manufacturer (OEM) agreements
List of key manufacturers and manufacturing summaries
Manufacturing agreements

9. Customer and Product Support

Customer satisfaction surveys
Current sales brochures

10. Regulatory Matters

Government permits
Notices of violations from governmental or regulatory bodies
Government licenses
OSHA, EPA, ERISA, COBRA, FLSA, EEOC, NLRB, etc., notices

11. Litigation/Disputes

Summary of any litigation or arbitration matters
Copies of all litigation complaints
Copies of all arbitration filings
List of all orders, writs, decrees, injunctions, judgments, or rulings by any court or agency
Documents related to any threatened litigation, arbitration, or governmental action
Environmental claims and actions
Copies of lawyers’ letters to auditors
Past settlement agreements

12. Insurance

Summary of all insurance policies
Copy of directors and officers liability insurance (D&O) policies
Copy of liability policies
Copy of key person insurance policies
Copy of workers’ compensation policies
Other insurance policies
Insurance claims pending
Description of any self-insurance programs or captive insurance programs

13. HR/Employees/Consultants

List of all employees by title, salary, commission, options, non-cash compensation, bonus, date of hire, severance obligations
Organization chart
Employment agreements
Standard offer letter to employees
Non-competition and non-solicitation agreements
Benefit plan summary
401(k) plan
Health and medical plan
Life insurance plan
Dental plan
Retirement plan
Disability plan
Vision plan
Childcare plan
Other benefit plans
Employee handbook
Employee policies not reflected in handbook
Collective bargaining agreements
Bonus plans
Profit-sharing plan
Incentive plans
Change in control plans or agreements
Stock option or restricted stock plan
Listing of consultants and independent contractors and summary of arrangements
Consulting and independent contractor agreements
Severance plans
Description of any pending or threatened labor or employment disputes or work stoppages during the last three years

14. Press and PR

Press releases
Newspaper articles
Analyst reviews

15. Related Party Transactions

Written agreements (and description of oral arrangements) between the Company and any current or former stockholder, officer, director, or employee of the Company
Description of any direct or indirect interest of any stockholder, officer, director, or employee of the Company in any corporation or business that competes with, conducts any business similar to, or has any present (or contemplated) arrangement or agreement with (whether as a customer or supplier) (i) the Company or (ii) the acquirer
Documents not covered by the above relating to agreements of the Company in which either current or former stockholders, officers, directors, or employees of the Company are or were materially interested
List identifying any stockholders, officers, directors, or employees of the company who have an interest in any of the assets of the Company

Wednesday, July 18, 2018