In mergers and acquisitions, virtual data rooms are commonly used as data repositories by companies or divisions being acquired or sold.
These companies provide interested parties with access to the virtual data room, which serves as a controlled environment where confidentiality can be preserved.
The data room thereby removes the requirement for physical storage for data and can provide access to an unlimited number of parties at any one time.
A virtual data room or data room (it is more frequently called, a “VDR” or "electronic data room") is a secure online space that acts as a repository of a company's documentation.
Online data rooms allow users to share critical business information with clients, investors and company leadership over the internet in a controlled environment.
VDRs enhance companies' due diligence processes and reduce the physical paperwork involved, reducing overhead, clutter and waste. You may also come across names such as "virtual deal room", or "dataroom" or "private virtual room" which mean the same.
Here is how virtual data room looks like.
A Virtual Data Room is essentially the next generation of data room.
Data rooms were physical, walk-in rooms within companies where relevant data would be stored. Detailed logs were kept of everyone that entered the data rooms such was the sensitivity of the data stored within.
While these were a major advance on the traditional method of storing sensitive data - filing cabinets behind locked doors - they still suffered from excessive use of energy, being clunky and expensive to run.
Furthermore, like much of early technology, data rooms were far from user- friendly. So, data rooms now mean advanced cloud data storage, but depending on the chosen provider, the capabilities and features can widely vary.
One of the several advantages that virtual data rooms have over their data room predecessors is that they’re on-demand.
That is, you can use it for what you want, when you want. The main reason for using virtual data rooms is safe and efficient storing and sharing of documents either between employees of a company, or the employees of several different companies.
This makes the benefits of VDRs applicable to a range of industries and situations.
While we typically associate their usage with the financial services sector, particularly asset management, joint ventures and mergers and acquisitions, many industries are now using virtual data rooms in their day-to-day operations for their information and data needs.
On the surface, this is a reasonable question.
But in fact, there are numerous reasons why cloud storage is inadequate when it comes to modern data needs, and not just for large organizations - even small boutique companies now usually turn to virtual data rooms, even when their data needs are relatively limited.
There’s a few reasons for this:
In the modern business environment, the only thing that unites all firms is the need for quality data.
Less than 30% of Amazon’s operating income is earned from retail, while over 70% is earned through AWS - its data services.
Furthermore, companies have really only begun to scratch the surface of the potential of data in business.
There are a number of purposes for which companies use data rooms including:
This means that everyone uses data rooms. Just consider some of the applications to the following industries:
A VDR is a solution for any business that wants to streamline their document sharing and make it more efficient. People who have the following needs will make perfect users of VDRs:
Investing in a VDR makes sense when you don't want to tie up resources with a physical data room. Business owners, clients, suppliers, acquirers, leaders, and managers are suitable candidates for a VDR.
VDRs are considered extremely secure - hence why they are often called “secure data rooms”.
More specifically, ISO 27081 certification is considered the premiere security choice for cloud storage systems.
Platform’s security measures provide clients with controls, reporting, and procedures required to keep all their data and operations safe.
So, data room providers take a comprehensive, multi-faceted approach to secure online files. Several complex layers work together to create an all-encompassing barrier against potential risks and threats.
Here is a list of features of VDR which make it more secure when sharing documents and data:
One of the best parts about online virtual data rooms, is the ability to customize room structure based on your needs.
Data rooms are compiled of folder and file structures that are filled with documents or files. For example, an investment banking team using a virtual data room for due diligence can set up folders for legal, IT, HR, finance, and tax files.
Once files and documents are in the room, they are in a safe environment for different team members to have access to them. And the level of access can be adjusted for various users.
The data within a virtual data room is oftentimes stored in a variety of places; countries or even continents, depending on where the service provider’s data centres are located. Providers invest money in data room security to make sure clients data is in safety.
Depending on the server provider, some create multiple copies of the data and store these in disparate locations to ensure that it won’t get destroyed or be inaccessible in the event of a natural disaster.
At the same time even data room provider companies don’t have access to your data, the source documents and files, same as other people outside of the room.
It makes sense to avail of free trials with data rooms to see which one works for your needs before uploading too much data to the server, making a move to a different VDR more complicated.
This will allow you to check between the subtle differences in the features, capabilities, ease of use, interface and of course, costs, involved with each individual data room.
You can find various virtual data room comparison charts and review the best on the market.
Regardless of industry it’s important that companies seek out the type of VDR provider that best suits their unique needs. What many find, after careful assessment, is that those needs change over time.
Commonly, companies will look for providers with specific feature sets, price points, security implementations, and usability which they can test during a free trial - offered by most providers in the industry.
There are some options how you can analyse what each data room provider offers. Here they are:
The best advice we can give you is to try each data room provider you like visually by utilizing a free trial.