A data room is a secure location that is created by a seller wherein a firm's confidential data is then placed for inspection by the purchaser. The data room is an integral part of the the due diligence process, which takes place after a non-disclosure agreement has been signed. A data room is also known as a due diligence data room.
An earnout is a financing arrangement for the purchase of a business in which the seller finances a portion of the purchase price, and payment of this amount is contingent on achieving a predetermined level of future earnings. An earnout is often used to bridge a valuation gap. The seller only gets paid if the predetermined level of future EBITDA or other financial targets are achieved.
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