Well-organized data rooms can protect the seller from liability. The information provided should be well documented.

Disputes over M & A transactions have gained in importance in recent years – according to a study by the consulting firm and the international law firm on post-M&A disputes in the German-speaking M&A market. The formerly usual reluctance of the transaction parties in the assertion of claims after closing has given way to a pragmatic view, according to which existing claims are increasingly asserted.

Typical Issue: Warranties

A typical issue in M&A transactions is the accuracy of the seller’s mostly extensive warranties in the sales contract. A condition of a claim is that the actual state of the acquired company deviates from the promised target state. To define the target state, information about the company is made available to the buyer in advance of the transaction in a physical or virtual data room. The purchase contract often states that circumstances disclosed in the Dataroom do not constitute a breach of the contractual warranty. However, this only applies if the disclosure made in the Dataroom was “fair”, ie contains the information that the buyer reasonably needs in order to obtain an appropriate overview of the relevant aspects.

Request for disclosure in the Dataroom

Under what conditions the disclosure is fair, the parties can contractually regulate in any depth of detail or leave as indefinite legal term of judicial determination in individual cases. The allegation of lack of fairness can arise from different points of view, such as the organization of documents. If important documents are placed in unusual places, for example, the assumption of unfair disclosure is close. Unfair can also be the data space process itself, for example, if continuously tedious and unsorted subsequent deliveries occur. Also, the selection of documents may be unfair if they contain incomplete or soothing representations or documents are too darkened, for example.

Clashes on M&A transactions have increased in recent years. Well-organized data rooms can protect the seller from liability. The information provided should be well documented.

To avoid allegations of lack of fairness, the data room should be clearly structured according to subject areas and societies. The documents should be numbered accordingly and meaningfully titled. The Dataroom should also be opened only when it is nearly complete. Ongoing document replacements worsen the clarity. Subsequent deliveries should be identified as such and subsequently added documents must be inserted in the data room, continuing the original numbering. The buyer should not receive too many documents outside the Dataroom. At best, this should be done with very sensitive documents, such as management contracts or minutes from board or board meetings. The blackening of documents should be handled with caution. Antitrust or data protection concerns about disclosure should not be overstated. Sensitive documents and blackened versions of blackened documents can initially only be disclosed to the buyer’s consultants. These report the content to the buyer, with the requirement to give information only in summary but without details. Immediately before concluding the contract, however, these documents should also be placed in the data room to document the disclosure.


A good organization of the Dataroom can protect the seller from being charged with unfair disclosure. The information provided by the seller in a data room must be carefully documented. Only in this way can the important preservation function of the Dataroom be guaranteed for later disputes.

What you should consider in a data room provider

In times of digitization, it is no wonder that even data rooms now exist mainly on a virtual basis. This so-called virtual data room is especially useful for business people. For example, M&A negotiations allow buyers and sellers to securely view all important documents. It also ensures that only authorized users receive access and that all documents are not easily modified.

Although this system appears similar to other data-sharing platforms (such as Dropbox), both systems focus on different aspects. Data sharing is all about making sharing documents easier. It ensures information sharing and all stakeholders are able to complete documents.

A data room on the other hand focuses more on the security of the documents. Everything is strictly controlled, but at the same time facilitates the secure sharing, storage and viewing of documents. All stakeholders have assigned roles and positions to clearly distinguish who only looks at documents and who is allowed to make any changes.