Weak Industries Ltd. is contemplating to sell its business to Expensive Enterprises Ltd. (EEL). As a Practising Company Secretary, EEL has engaged you to create a 'data room' and take further steps. Explain to the manage

Answer 3(a)(i) A Data Room provides all important business documents/information which may be on financial, regulatory, IPR, marketing, press report or any important material aspect pertaining to a business transaction. Otherwise it provides for a common platform/place where all records of important business information are kept for review by a potential buyer after signing of a Non-Disclosure Agreement (NDA). As data room discloses confidential data which is not available for public and may relate to business process, trade secret, technology information etc., the access to data room is made after signing of Non-Disclosure Agreement. Answer 3(a)(ii) Benefits A Data Room provides the following benefits:- Removes ambiguity in the minds of buyer about the profitability, growth prospectus, and sustainability of business that is proposed to be bought. Provides material information that helps in doing a SWOT analysis. It enables the buyer to do a better bargain through the analysis of the data. May expose the weakness of the seller which is not directly provided to the buyer- For example, a material off balance sheet transaction. Provides data that helps in better Valuation of business for both buyer and seller. Answer 3(a)(iii) Circumstances under which creation of data room is required Mergers, Amalgamations and Acquisitions, Strategic Alliances, Partnering agreement, Business Coalitions, Outsourcing agreement, Technology or Product Licensing, Joint Ventures through technical or financial collaboration, Venture Capital investment, and Public Issue