What Is a Virtual Data Room?
A virtual data room (VDR) is a secure platform where critical documents can be stored throughout the duration of an M&A transaction. These documents may include employee information, contracts and financial statements. This helps to expedite the due diligence process for the buyer while also helping secure the confidentiality of the selling company’s details.
Due diligence is the study that is carried out by a buyer or potential investor to analyze the company they are considering and its assets prior to engaging in any business transaction. The technology has changed this process dramatically over the years, especially in relation to sharing private information. Instead of having a physical space filled with filing cabinets that can be closed and opened by various people, VDRs are now accessible online. VDRs are the new way for companies to share their files with investors and other stakeholders.
Many online VDRs adhere to strict security protocols. They have many complicated layers that work concert to create a barrier against potential threats. This includes physical security – including continuous backup, data siloing on private cloud servers multi-factor authentication, and accident redemption, as well as application security, which includes encryption methods including digital watermarking and audit trails of all activities within the data room, and more granular permissions that allow customized folder structure.
Another major feature that differentiates a VDR from its competitors is its ability to integrate into existing processes and systems. This allows users to use their preferred tools and applications for the job at hand while streamlining the process of M&A transactions. In addition, some VDR providers offer more cost efficient plans that are based on how much is uploaded to the platform, number of users, size, and length of project, which helps companies avoid unexpected costs and overages.