The Role of Virtual Data Rooms

A virtual data room enables users to review documents from anywhere that has an internet connection. They can eliminate the need for dealmakers to travel and look over piles of documents in a physical environment. They can instead access the documents via the internet. This reduces the cost of due diligence and accelerates the entire process.

Due diligence in M&A transactions is one of the more common uses for VDRs. These transactions require extensive document sharing between the sell-side and buying side of the transaction and VDRs are the best way to share documents in a safe and controlled environment.

Investment bankers are also a typical group of VDR users. They assist their clients with IPOs, capital raising and M&A transactions that usually involve a large amount of document sharing. They also need to be vigilant about protecting confidential information while allowing clients access to documents.

Life science companies are a different major user group for virtual data rooms. They typically work together with accountants, consultants and lawyers to design and store their sensitive documentation. These parties need to be in a position to gain access to the information without potentially breaching the privacy of any individual or causing a compliance issue.

Modern VDR has granular permissions which permit the administrator to control who is able to access what folders and files in the data room. They can also limit access by the amount of times a document has been examined, and restrict access based on time or IP address to stop hackers from getting access to your data. Other security features include customizable watermarks, encryption while in the process and at rest as well as remote shred.

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