The use of a virtual deal room (“VDR”) has become commonplace in modern merger and acquisition practice, replacing the formerly prevalent document room. The advantages of a VDR include reduced cost; reduced security concerns; accessibility to multiple parties simultaneously and 24/7; reduction in actual deal time; and an electronic data trail establishing who saw what and when.
An important consideration in the deployment of a VDR is the question of who will serve as the gatekeeper to the VDR, determining what information is appropriate for posting and what level of security and access to assign to such information.
In our opinion, the Seller’s legal counsel is the appropriate gatekeeper to the VDR. Personnel of the seller, while more familiar with the information, are typically the least familiar with the deal process and potential legal issues posed by the information. They are also the least likely to have the time, with the additional stress of gathering and producing due diligence information already layered on top of their routine daily duties. And while deal intermediaries are certainly the most familiar with the deal-making process, they are not legal counsel and necessarily familiar with the legal issues posed by the information.
The primary concern of the seller’s legal counsel is to preserve client confidential information and privileged attorney-client communications and therefore s/he should serve as the deal room administrator. Generally, once privileged information is conveyed to someone outside the scope of the privilege, the privilege is lost and production of the information may be compelled at a deposition or legal hearing.
The modern deal-making paradigm requires virtual data room deployment. Deal makers and their clients must become fluent in VDR utilization.