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How to Choose The Right Data Room For Investment Banking

Virtual data rooms are the best place to store information online in a safe location. They not only speed up the due diligence process, but also help teams stay organized while sharing data and files.

While many different industries use virtual data rooms, investment banking is possibly the leading reason behind virtual data rooms' success and growing market. 

What is an Investment Banking Virtual Data Room?

An investment banking virtual data room is an online storage center, similar to a warehouse, if you will, of essential and sensitive documents and information. Investment bankers in particular need a VDR that will allow them the control and heightened oversight to see who has entered the VDR, how long they spent in it, and what they worked on.

Companies use VDRs to manage M&A transactions, deal flow tracking, share data with clients and third parties, and store files. The data rooms help to provide value to not just the investment bank, but the buyers and sellers.

In the past, before VDRs, M&A deals would take significantly longer to close. This is due to the fact that due diligence was completed using hard copies of information. Teams would have to travel to on site locations, dig through filing cabinets to find the right information, and scan documents individually. When VDRs were invested, the changed the entire process. Now, there are many different VDR providers for investment banks to choose from.

Not all VDRs are created equal and with each one being unique, it’s important to really think about what is most vital for your business and clients.

the right virtual data room for investment banking

Why Investment Banks Use Virtual Data Rooms?

Investment bankers must use VDRs in order to play an active and proactive role in M&A transactions. Furthermore, the primary reasons investment banks use VDRs are:

  1. Securely store documents. M&A transactions specifically require the review and analysis of a tremendous amount of documents from personnel information to financial documents. It is of the utmost importance to keep this information in a secure location in order to protect not only the company, but also the employees. One of the top benefits of using a VDR is that it lowers the risk of third party information theft. Additionally, having all data in one secure location improves organization and eliminates the games of back and forth emails, as well as faxing and/or sending hard copies of documents (which can be time consuming and expensive). 
  2. Increase collaboration. VDRs, especially those with project management features, allow for a two-way flow of information, therefore, increasing collaboration between stakeholders. Also, when collaborating with stakeholders from different time zones, VDRs are beneficial as they never “sleep.” 
  3. Improve transparency and accountability. With heightened oversight, investment bankers can clearly track tasks and how much time is being spent on specific items. This data is incredibly valuable as it creates transparency and accountability for users. Similarly, when evaluating where users are spending the majority of their time, the investment banker can predict potential problem areas, as well as the buyer’s or seller’s level of engagement. 
  4. Close deals faster. A direct consequence of the aforementioned benefits is that deals in investment banking M&A tend to close faster when a VDR (again, specifically one with heightened oversight for investment Bankers and project management features) is utilized.

How Banks Use VDRs?

Because investment bankers play such a critical role in the set up and running of a company VDR, it is not surprising that much of their process is centered around VDRs. Specifically, here are common ways investment bankers utilize VDRs:

  1. To determine transaction timing 
  2. To prepare the target and make it attractive to buyers
  3. To help buyers and sellers set up and maintain their VDRs
  4. To conduct due diligence
  5. To successfully plan for integration.

Investment Banking Virtual Data Room Providers

  1. DealRoom. DealRoom is designed to make complex deals simple with its Agile approach. Consequently, it has been utilized for billion dollar transactions and is suitable for deals >50M where there is a greater need for diligence and integration process management. 
  2. FirmRoom. FirmRoom is similar to DealRoom in many ways, though it offers less of the project management features, and therefore, it is more aligned with a traditional VDR. It is used for deals <50M. 
  3. Intralinks. Intralinks is a very well known VDR, however, it does not contain additional project management features.
  4. Merrill. Again, Merrill is a more traditional VDR. It is known for its highly ranked security and is said to be rolling out new features soon.
  5. Firmex. Firmex is a well known VDR and often praised for its strong customer support.

Steps of Searching for a Good VDR

  1. Define your needs and abilities
  2. Identify desired features
  3. Consider your budget
  4. Compare virtual data rooms 
  5. Read the reviews (Capterra, SoftwareAdvice, Trustradius)
  6. Select VDR providers, check their sites and talk to support
  7. Test virtual data room via free trial

Tips For Choosing The Best Data Room For Investment Banking

Things to look for in a high quality VDR for investment banking:

1. Deal Specific Features

With investment banking, you're going to be using the Virtual Data Room for a large number of tasks. These can include:

  • Sell-side M&A
  • Buy-side M&A
  • Debt and equity fundraising
  • Raising Capital
  • Private placements
  • Strategic Partnerships
  • Bankruptcy and restructuring
  • Loan syndication
  • IPOs

You're going to need a VDR that can handle all of these tasks and more. Being able to find a good VDR that allows you to stay organized and on-track from for the entire deal lifecycle is critical.

The more smart features included in a VDR, the less physical efforts you need to put into it. This increases the speed in which you close a transaction, as well as making your document records more accurate.

For example, some VDRs come with a non-duplication feature that alerts you and helps to keep the same documents from being uploaded multiple times.

Another feature is smart text. This is helpful for when you're looking for a specific document and can't recall what it's called or where it is. Simply type in some key text and the software will help to find the document you are looking for.

2. Power/Control

Investment banking involves high stakes. There is secure paperwork and other documents that you don't want everyone to have access to.

Having the ability to pick and choose who can view or download specific documents is vital. It helps to make sure that files and documents are only being seen by those who need to see it, and it helps to prevent data breaches.

Virtual data rooms can come equipped with specific features tailored for remote access and control. Teams need to be able to access the data room from anywhere and from multiple devices.

M&A virtual data room access

3. Security

Due to the nature of investment banking and the need to keep confidential information safe, security should be the top factor when looking for a VDR.

Sharing information is the main point of managing any transactions from within a VDR. A quality VDR will have the latest and greatest in encryption technology to help keep your information safe.

Most quality VDR programs will include features such as screen only viewing. This is when the documents are set to be viewed only, and no one is allowed to download, print, or edit it.

Other features that you should look for are unique watermarks and an electronic leash. These make it so that if a document is printed, the user's name is on it, so you always know who downloaded the file. An electronic leash is great for pulling a document back after someone's VDR access is revoked or expired.

Also, look for specific data center certifications such as SOC 1/SSAE 16/ISAE 3402, SOC 2 Type II, FISMA, DIACAP, and FedRAMP, and ISO 9001 / ISO 27001.

4. Fair Pricing

Traditional data rooms charge per page, which can result in extremely high invoices. They also charge per users, period length, and come with overage charges and extra fees. More modern, and investment banking friendly, data rooms have switched to flat rate pricing options that usually include unlimited data, users, and overage charge protection. Teams no longer have to worry about counting pages, and can offer their clients fair pricing.

And be wary of free data room and file sharing services, such as Dropbox and Google Docs, which can be a viable virtual data room option for startups. They do offer free file sharing, however, they usually lack key security features and data room functionalities which prevents them from being an appropriate fit for investment bankers.

5. More than a Data Room

Due to the complex nature of investment banking, teams often choose to use data rooms that incorporate project, pipeline, and integration management. These types of data rooms are equipped to manage deals for their entire lifecycle, instead of just parts of them, such as due diligence. This helps streamline workflows, increase collaboration, and improve internal and external processes.

6. New Customer Training

Teams need a virtual data room that is easy to set up and with a reasonable learning curve. Everyone's ability to learn a new software is different, and the less time internally spent training clients and teams to use a VDR, the more time you can spend on the transactions. Be sure to check out a data rooms's customer service options. Some offer 24/7 customer service via chat, email, and call. Others offer additional training videos and resources on their website.

Why Use DealRoom's VDR in Investment Banking Process

  • Reduce work and work smarter. The technology behind DealRoom streamlines communication, resulting in the elimination of duplicate requests, the ability to clearly, and easily, assign tasks, drag and drop documents in bulk, and live link documents; all of which can save users up to an hour a day. Additionally, DealRoom’s platform is ideal for workers who want to stay organized as due diligence picks up steam. DealRoom also boasts features such as: full text search, auto indexing, report production (PDFs and Excel reports) with the click of a button, easy document transfer, and built-in communication. Cumulatively, these built-in features allow for efficient and smart practices. 
  • Reduce cost. While more efficient and faster work can result in reduced costs, DealRoom also limits costs by moving away from the antiquated per page pricing method. For a flat fee (allowing investment bankers to easily plan for costs), DealRoom offers unlimited data. Now, investment bankers and the companies they work with can focus on the actual data, not the cost of uploading and sharing the data. 
  • Heightened oversight and focused analytics. As previously stressed, investment bankers need a VDR that allows them to take a proactive role via heightened oversight. The bird’s eye view they are afforded in DealRoom allows them to track where others are spending their time, as well as the buyer’s level of engagement and potential areas of apprehension. This overview feature also allows for data to be collected regarding overall progress, such as the total number of requests and a breakdown of these requests. 
  • Ease of use. Finally, whenever embracing a new tool, one must consider how intuitive it is. When focusing on making deals, no one has hours to spend learning new platforms. DealRoom is easy to use as it only takes 20 minutes for a user to be trained in setting up a company profile. 


Just like with any tool, you can buy all the fancy features, descriptions or names. But if you don't use them all, or use them correctly, you're not taking advantage of the true value of the platform. So, be sure to take the time to learn whichever platform your company chooses.

At the end of the day, companies should store their data in a platform that is convenient, secure, affordable, and efficient.

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