GoPro says it is formally reviewing strategic options, including a potential sale or merger, marking a potentially major turning point for one of the most recognizable brands in modern imaging.
A virtual data room (VDR) (sometimes called an online data room) is a secure online repository for a company’s most important and confidential agreements and documents. In mergers and acquisitions (M&A), virtual data rooms have become core pieces of infrastructure because they make it dramatically easier to share information with potential buyers, investors, lenders, legal counsel, and other approved participants while maintaining confidentiality and control.
In a typical acquisition, the buyer conducts extensive due diligence to understand the target company’s financial performance, contracts, liabilities, intellectual property, customer concentration, employee matters, and more.
The VDR is where that diligence is facilitated. It is populated with critical materials—often thousands of documents—organized in a structured way so a buyer can quickly locate and evaluate what matters most. A well-run VDR can speed up a transaction, reduce friction between parties, and help prevent misunderstandings that derail deals.
Just as importantly, a VDR enables the seller to disclose information in a controlled manner. Access can be limited to pre-approved individuals, permissions can be tailored by role or bidder, and activity reporting can help the seller (and its advisors) understand who is reviewing what—and how seriously.
Below is a guide on why virtual data rooms matter, how to prepare them, common pitfalls, what should be included, and the increasing integration of AI into these platforms for M&A deals.
A well-structured VDR is not just a file cabinet, it is also a transaction tool that supports speed, diligence quality, and risk management.
There are many providers of virtual data rooms in the market, and pricing typically depends on factors like storage, user counts, features, AI integration, and how long the room will be used.
When evaluating vendors, the real question is not, “Can it store files?” but, “Can it support the diligence process smoothly and securely?”
Preparation quality often correlates with deal velocity. Sellers that treat the VDR as an afterthought frequently pay for it later through delays, credibility loss, or retrades by the buyer.
One underappreciated value of assembling the VDR is that it forces a company to confront gaps in its historical documentation. Buyers routinely uncover issues that must be fixed before closing.
Deficiencies like these can become closing conditions, increase escrow/holdback demands, extend timelines, or reduce valuation. In difficult cases, a buyer may require remediation that is operationally painful—such as locating former employees to sign missing IP assignments.
As a general rule: everything material about the business that a buyer would reasonably need to evaluate the company, price risk, and draft the acquisition agreement should be included. However, what is “material” depends on the company’s size, industry, regulatory profile, and transaction structure.
Below is a comprehensive, practical checklist of document categories commonly expected in an M&A VDR.
Artificial intelligence is increasingly being integrated into or used with virtual data room platforms and related deal-management tools. When used thoughtfully, AI can materially improve the speed, accuracy, and effectiveness of the M&A due diligence process, benefiting both buyers and sellers.
For example, the Luminance AI software can be integrated into VDRs to search among hundreds of thousands of contracts to spot any unusual provisions, such as:
AI is rapidly becoming a meaningful tool in virtual data rooms. When integrated properly, it helps sellers run cleaner, faster processes and helps buyers conduct deeper diligence with fewer resources. As M&A transactions continue to demand speed without sacrificing rigor, AI-enabled VDRs are likely to become the standard rather than the exception.
In modern M&A, diligence is won or lost on speed, accuracy, organization, and completeness. A strong virtual data room helps a seller run an efficient process, reduces buyer uncertainty, and limits the risk that issues surface late in the process—when leverage shifts and deal terms become more punitive.
If you are preparing for a sale process, treat the VDR as a strategic asset. Build it early, organize it thoughtfully, and ensure it tells a coherent story about the company that is supported by clean, complete documentation. Done right, the VDR becomes one of the most practical tools you have to protect confidentiality, preserve momentum, facilitate due diligence, and close a successful transaction.
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Copyright © by Richard D. Harroch. All Rights Reserved.
In acquisitions of privately held companies, an acquisition letter of intent/term sheet is often entered into by both parties. The purpose of the letter of intent is to ensure there is a “meeting of the minds” on price and key terms before the parties expend significant resources and legal fees in pursuing an acquisition, and before sellers agree to grant exclusivity to buyers.
The purpose of this article is to explore the key issues in negotiating and drafting an acquisition letter of intent.
A letter of intent can be short or long, depending on the dynamics of the negotiations and the desires of the parties. Here are the types of items that can be included in a letter of intent, a number of which are discussed in greater detail later in this article:
Long-form letters of intent are more comprehensive and legally constructed, and designed to reach a meeting of the minds on many of the key terms of a potential deal. The key advantages of a long-form letter of intent are:
The primary disadvantage of a long-form letter of intent is that it may bog down the momentum of getting a deal done, as the parties deal with too many difficult issues early on. It may also result in a breakdown of the negotiations that could have been avoided if certain issues had been deferred.
A short-form of letter of intent will usually only address the price and perhaps a few key terms (such as whether there will be any escrow holdback for seller’s indemnification protection, length of escrow, and the exclusivity/no shop right for the buyer) and has the advantage of being quicker to negotiate than a long-form letter of intent. The obvious disadvantage is that it leaves many important issues to be resolved later on.
From the perspective of the selling company, it will typically want the letter of intent to be as detailed as possible on the key issues of the deal. The reason is that once a letter of intent has been signed and an exclusivity negotiating period has been granted to a buyer, the leverage in the negotiations will most often swing to the buyer.
Therefore, the seller will often want to have a complete picture of the price and deal terms before it is locked up and precluded from talking to other potential buyers. And the more detailed the letter of intent, the more likely that a definitive acquisition agreement can be negotiated successfully. The best time to get key concessions from a buyer is when the buyer believes there are competing bidders and where it does not have exclusivity.
From the buyer’s perspective, especially where the buyer has considerable negotiating leverage, it will favor a short-form letter of intent that includes a long period of exclusivity in order for it to finish its due diligence and negotiate a definitive merger or acquisition agreement.
The buyer typically will argue that it can’t agree to some of the key terms of the deal in the letter of intent until it completes its due diligence. (The seller will dispute that argument—the buyer can agree to key terms, but if problems arise in its due diligence, it is always free to renegotiate any provision.)
In some situations, it is in the buyer’s interest to also have a detailed letter of intent to avoid spending lots of management resources and legal fees on a deal that might not get consummated.
The letter of intent will typically state that it is non-binding, except for certain designated provisions. Usually at this stage in the acquisition process, neither the buyer nor the seller are willing to be bound to conclude a transaction. Further, the letter of intent does not contain all the terms that should be agreed upon in an acquisition.
Nevertheless, certain provisions are typically designated as binding, such as:
The letter of intent should clearly state which portions are binding and which are not. Lack of clarity on this point might allow a court to enforce (or refuse to enforce) a provision contrary to the intent of the parties.
The buyer will typically insist on a binding exclusivity/no shop period where the seller and its officers, directors, representatives, advisors, employees, stockholders, and affiliates may not engage in any discussions or negotiations with, provide information to, or enter into agreements with any other prospective buyer. The seller is also precluded from “shopping” the buyer’s bid or the company.
The exclusivity provision will also typically require the seller to immediately terminate any other sale discussions.
The buyer may also ask that it be notified of any inquiry or offers from other potential buyers during the exclusivity period, and the terms thereof (including the identity of the third party).
The seller will want to keep the exclusivity period short (for example, 15 days) and the buyer will typically want longer (for example, 30-60 days). Some buyers may request even longer periods of exclusivity because of due diligence issues.
The seller should insist on a sentence that allows it to terminate the exclusivity period early if the buyer subsequently proposes a lower price or materially worse terms, or if the seller believes in good faith that the parties are not making sufficient progress on finalizing a deal or the buyer is not keeping up with the time table agreed to by the parties (discussed below). The buyer will, of course, resist giving the seller a basis to terminate exclusivity early since the buyer will begin spending substantial resources on conducting due diligence and preparing documentation. In many instances, the compromise will be an exclusivity period somewhat shorter than the buyer desires.
The price for the deal is obviously the key issue, but the letter of intent should make clear:
Sometimes it is useful to set forth in the letter of intent dates by which the parties expect various matters to be completed, such as:
In private company acquisitions, the seller often asks for indemnification from the buyer for breaches of representations made in the acquisition agreement. Indemnification effectively adjusts the purchase price downwards and therefore the terms of indemnification are almost always the subject of lengthy negotiations.
The seller (and its stockholders), well aware that their bargaining leverage will decline once the letter of intent is signed, frequently will insist that the letter of intent set forth limitations on the scope of this indemnification obligation.
In contrast, buyers will typically resist, asserting that negotiation of the terms of indemnification should be deferred to the negotiation of the entire acquisition agreement, at which time the buyer will be much better informed about the seller’s business and liabilities. Although market practice today is to specify the size of an indemnification escrow and the extent to which it might be the sole source of recovery for buyer indemnification claims, it is sometimes difficult for sellers to obtain in the letter of intent additional limitations on its (or its stockholders’) indemnification obligations.
In some deals, the seller with leverage can take the position that the deal should be structured like a public company-type deal—that there is no escrow and that representations, warranties, and covenants expire at the closing. An escrow in private company acquisitions can be used to secure the seller’s indemnification by placing an agreed amount of the cash purchase price into an escrow. The seller will argue that if the buyer wants additional protections, it can do so through its own careful due diligence and by obtaining the protections afforded by M&A representation and warranties insurance.
In the last few years, M&A representations and warranties insurance, in lieu of extensive indemnification provisions, have become the norm (especially with private equity buyers).
Indemnification obligations may be limited in a variety of ways, such as:
The letter of intent will typically not include a detailed listing of the seller’s representations and warranties. But if the seller desires to have certain materiality or knowledge qualifiers for particular representations and warranties, it may be best to negotiate these in the letter of intent. For example, the seller may want to state that any representations and warranties concerning intellectual property infringement issues be limited by a knowledge qualifier.
To the extent there are any key employee issues for the seller or buyer, it may be prudent to address these in the letter of intent. Such issues could include:
The seller will want to set forth key conditions to closing (and ideally will want the letter of intent to set forth the only conditions to closing). That way, the seller will have a better understanding of the likelihood of a closing.
The typical closing conditions that a seller will allow for the benefit of the buyer include:
The buyer may also insist on the following closing conditions, among others:
It is desirable for the letter of intent to set forth how and where resolution of disputes will happen, both under the letter of intent and under the acquisition agreement.
My preference is for a confidential binding arbitration/provision, under the AAA or JAMS commercial arbitration rules in existence at the commencement of the arbitration, before one arbitrator chosen by the arbitration association. In deals involving international parties, international arbitration firms (such as the International Chamber of Commerce) should be considered for this purpose.
Such an arbitration provision allows for faster and more cost-effective resolution of disputes than litigation. Litigation can be extremely costly and last for many years during any appeal process.
Among the issues to be considered with respect to an arbitration provision are the number of arbitrators, the location of the arbitration, the scope of discovery, the time period for resolution, and who will bear the fees and expenses of the arbitrator. I also typically prefer a provision that states that each party will pay its own legal fees and costs, and 50% of the arbitrator’s fees.
A well-drafted letter of intent can increase the likelihood of an acquisition successfully closing, on optimal terms. To see some sample letters of intent, check out the Forms and Agreements section of AllBusiness.com.
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When you embark on a transaction to sell your business, you’ll find that the world of mergers and acquisitions (M&A) demands preparation, precision, and purpose. Successfully navigating an M&A deal for a private company forces you to understand both business and legal dimensions and to engage the right advisors, set the right timetable, and anticipate the key pitfalls. Below are 32 critical issues to consider for sellers to maximize value and minimize risk in a private-company M&A deal.
In private-company M&A transactions, time is often the enemy of the seller. As the process drags on, prices and terms typically deteriorate, and new issues—unforeseen liabilities, market shifts, regulatory surprises—may emerge. Speed matters. Set a driving timetable and maintain momentum. Let your lawyers know that they need to turn around drafts of documents on an expedited basis. Make sure the key decision-makers on each side are available to quickly resolve key issues.
Running a competitive auction or soliciting multiple potential buyers is one of the best ways to optimize sale value and deal terms. It gives a seller leverage, benchmarks of value, and the ability to fend off low‐ball or unfair offers.
Sellers have to understand that they will be subject to an extensive due diligence investigation, and they must be prepared in advance for all that entails. The buyer will want to see detailed financial statements, copies of all material contracts, information on key intellectual property, employee and benefit arrangements, and much more.
Normally, the seller needs to have all of that information in an online data room, which can be quite time-consuming to get correct and complete. Sophisticated bidders will tell the selling company that preparing a comprehensive and well-organized online data room is important.
The company will typically respond that it is organized and on top of it—but the selling company often doesn’t understand the enormity of the undertaking involved. (See The Importance of Online Data Rooms in Mergers and Acquisitions.)
There are outside companies, such as SBS, that can significantly help with this burden.
Before sharing sensitive information, ensure prospective acquirers sign a strong non‐disclosure agreement that prohibits solicitation of employees and protects your confidential business data. This is especially important if a potential buyer is a competitor.
Retaining a seasoned investment banker or M&A advisor significantly improves your process. Negotiate the engagement letter carefully—fees, tail provisions, indemnification and negation of conflicts should be crystal clear.
Good judgment is essential when negotiating an M&A deal. You must know what matters—and what doesn’t—and be ready to make quick decisions. Recognize when to trade lesser points in order to protect the big ones: value, structure, and risk allocation.
Buyers often push for exclusivity early to avoid competition. From a seller’s standpoint, you should delay granting exclusivity until the buyer has committed to key terms (e.g., via a letter of intent), and negotiate short exclusivity windows (e.g., 15 to 21 days) rather than long ones (45+ days).
From the seller’s perspective, it will want the exclusivity period to terminate early if the buyer proposes a lower price or any other worse terms than detailed in the letter of intent. The seller will also want to make sure that any extension of the exclusivity period requires that the buyer affirm its price and terms and that they have completed their due diligence.
Negotiate a detailed LOI that sets the stage for key deal terms—price, payment structure, escrow/holdback, indemnities, closing conditions, employee issues, and dispute‐resolution mechanisms. A strong LOI improves your leverage pre-closing. See Negotiating An Acquisition Letter of Intent.
David Lipkin, an M&A partner at McDermott Will & Schulte, advises, “Getting the Letter of Intent right is crucial to ensure a favorable outcome in an M&A deal.”
The price and type of consideration are issues that will need to be addressed early in the process, and these go beyond agreeing on the “headline” price. Here are some of these issues:
Your ordinary outside counsel may not be sufficient for a complex M&A transaction. Engage dedicated M&A counsel with experience in private company deals—someone who can handle the urgency, negotiation, documentation, and closing efficiently. You want someone who has done hundreds of M&A deals.
Strategic acquirers (those already operating in your industry) may offer benefits—synergies, higher valuations—but you must understand how your business fits into their strategic plan. Be cautious about rights of first refusal or preferential treatment granted in earlier financing rounds.
Preparing the disclosure schedule (the list of contracts, intellectual‐property assets, litigation, employment matters, etc.) is time‐consuming and typically requires many drafts — you should begin early. A well-prepared schedule reduces post-closing indemnity claims and uncertainties.
Board members of a seller company must understand their fiduciary duties, manage conflicts of interest, and document thoughtful decisioning. Ignoring governance issues can harm both value and deal certainty.
Identify shareholder approval requirements early. Are dissenting shareholders or appraisal‐rights issues likely? Will all classes of stock vote? Delays or objections at the shareholder level can sink a deal after terms have been agreed.
Establishing an M&A committee of the board can improve agility and decision‐making. A nimble committee ensures issues are addressed quickly, reducing drag on the process.
Employee retention, incentives, and management continuity matter to both buyer and seller. Ensure key personnel are incentivized and consider tax impacts (e.g., Section 280G “golden parachute” issues). Consider how unvested options will be treated.
Buyers will assess culture fit and may want to implement retention programs.
Make sure the CEO and management team are appropriately rewarded and protected. See How CEOs and Management Teams Can be Rewarded and Protected in an M&A Transaction.
Buyers scrutinize your financial projections, assumptions and growth metrics. You, as a seller, must understand and defend your numbers—and demonstrate that management continues to run the business well during the M&A process.
In an era of digital disruption, IP diligence is intensive. Patents, trademarks, copyrights, domain names, open‐source software use, data privacy and cybersecurity issues must all be addressed proactively.
Missing corporate minutes, missing amendments to contracts, incomplete option agreements, and disorganized documentation can slow or kill a transaction. Address these issues early.
Check what third‐party consents are required (landlords, licensors, major customers) and aim to eliminate or minimize problematic consent requirements. It's a frequent source of delay or renegotiation.
Striking the right balance in disclosure is important: give the buyer enough information early to avoid surprises, but avoid over‐sharing early such that you lose leverage or risk competitive information exposure.
The definitive acquisition agreement is hugely important to both the seller and the buyer. There are many issues that need to be negotiated, and sophisticated M&A counsel is essential for the seller.
Some of the more important issues include:
Richard Smith, an M&A expert at Orrick, Herrington & Sutcliffe says, “The importance of a well-drafted M&A agreement cannot be understated to ensure a successful and expeditious deal.”
23. The CEO’s Role
The CEO’s role in an M&A process is hugely important. The CEO has to sell the vision for the business and clearly articulate why the company is such an attractive and growing business with sophisticated and differentiated technology, products, or services.
The CEO must have an understanding of the fundamental legal and business issues that will arise and be able to make many judgment calls on those issues.
The CEO also needs to keep the Board, the M&A Committee, and key investors informed at each key stage of the process.
The CEO is often put in a difficult position—to negotiate tough on key terms of the deal, knowing that he or she is negotiating with a future employer and not wanting to be perceived as difficult; this problem is exacerbated if the buyer is a private equity investor offering the CEO and other members of management a piece of the post-closing equity.
That is why it may be better for an advisor or the M&A Committee of the Board to take the lead in negotiating the deal terms/acquisition agreement, which then permits the CEO to act as a facilitator to get the deal done.
Post‐closing responsibilities often fall to a shareholder representative or third-party administrator (such as Fortis)—someone who handles escrow administration, working‐capital adjustments, earnout monitoring, and indemnification mechanics.
Since an acquisition process can take a significant period of time to complete. One issue that can come up is the variability of the financial performance of the business while the M&A deal is pending.
If the seller misses its projected financial numbers during the process, a buyer can see this as a red flag and require a reduced purchase price or may even terminate the negotiations.
Therefore, it is imperative that the management team keeps its eye on the ball in running the business (even though they will be distracted by the M&A process), and that the projections presented to the buyer for the anticipated diligence and negotiating period be easily obtainable.
Successful M&A isn’t just about deal documents—it’s about people and culture. Even during diligence, consider how management teams, employee morale, and organizational culture will merge post-closing. Early integration planning reduces risk of “implementation gap” and protects value.
Don’t assume your deal is immune from regulatory or antitrust review just because you are a private company. Early assessment of competition, foreign investment (CFIUS in the U.S.), sector‐specific regulation, and cross-border risks helps avoid costly surprises after signing.
With cyber threats on the rise, buyers expect thorough cybersecurity and data privacy controls. A major breach or insecure data architecture revealed late in the process can scuttle a deal or trigger post-closing liabilities. Ensure your policies, incident history, and remediation plans are ready.
The deal typically doesn’t end at closing. Sellers should understand earn‐out triggers, covenant compliance, holdbacks, and post‐closing obligations. Maintain oversight (or negotiate retention of a post-closing role) to ensure smooth transition and protect earned value.
AI is transforming M&A. AI tools can:
Sellers who embrace AI analytics, deal-readiness dashboards, and machine-learning-driven risk assessments gain a competitive advantage in speed, precision, and transparency. In modern M&A, AI isn’t replacing advisors—it’s amplifying them.
Many buyers, especially if third-party lending is involved, will engage a reputable accounting firm to assess the seller’s underwriteable EBITDA. Nick Baughan, Managing Director of the investment banking firm MarksBaughan, advises that a seller should consider hiring its own accounting firm to prepare its Quality of Earnings Report in advance. A Quality of Earnings Report is an analysis that assesses a company's historical and current financial performance to determine the sustainability and reliability of its earnings.
There are two reasons for the seller to prepare its own report in advance: The seller can position the best and most supportable view of EBITDA, and the seller is then equipped to expeditiously engage with the buyer's accounting firm. A huge time sink and value destroyer in deals is an under-prepared founder or CFO trying to respond to a team from the buyer’s accounting firm whose highly-experienced partner is looking to reduce EBITDA for valuation purposes.
Many deals now have M&A reps and warranty insurance (RWI). Some buyers will still try to push for a holdback or escrow to cover indemnification obligations of the seller, but the RWI market has evolved to the point where a deal over $20 million in enterprise value is typically better off with RWI, reducing the risk to the seller. The cost of the policy is small and can either be split or entirely borne by the buyer. The negotiation of the representations and warranties in the acquisition agreement typically happens more quickly and that time savings is more than made up by the time lost getting the RWI policy implemented.
In today’s market, selling your private company successfully in a mergers and acquisitions transaction hinges on preparation, transparency, strategic process and risk management. From building momentum and creating competitive tension to organizing your data room and preparing for integration, each of these 32 factors plays its part.
Engage seasoned advisors and technology solutions, adopt a disciplined timeline, maintain business performance, understand the transaction mechanics, and anticipate post-closing realities. With those principles in place, you’ll be in the strongest position to maximize value, minimize surprises, and execute a smooth transition.
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Copyright © Richard D. Harroch. All Rights Reserved.
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