Data room

The controlled repository, almost always online, where a seller places the documents a buyer has asked for.

Example

Four hundred files organised into folders, with access logged and sometimes timed.

Important

Volume is not verification. Everything in a data room was assembled by the seller, so a thoroughly read data room still contains no independent evidence.

Related terms

• Diligence request list — The written set of documents and access you ask a counterparty for, normally sent in waves rather than as one block.
• Primary source — A document that originated outside the transaction and was created for some purpose other than persuading you - bank statements, filed returns, signed contracts, public registers.
• Disclosure schedule — The document in which a seller lists the exceptions to what they are formally promising - the litigation, the defaults, the contracts that are not on standard terms.

Lessons that explain it

• The information request, and what a refusal tells you — What you ask for, and the order you ask for it in, determines what you learn. The response to the request is frequently more informative than the documents themselves. (13 min)
• Decisions that are not recorded are difficult to rely on later — Board minutes, written consents and maintained records are what prove a decision was properly made. They matter most in disputes, financings and sales, when everything is examined. (10 min)

All 578 terms in the Investing glossary