What Is a Virtual Data Room?

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A virtual data room (VDR) is a cloud-based storage space for documents and other data files that is used to share confidential information during complicated business transactions, such as mergers and acquisitions and due diligence procedures including financial audits, fundraising rounds, and legal procedures. When compared to traditional physical storage, VDRs provide greater control over access and security while decreasing management costs.

When selecting a VDR provider, be sure you choose one that is robust and has a complete set of features to satisfy the needs of your business. For example, you may think about whether the platform meets ISO 27081 standards for data protection or has strong malware and virus scanning and uptime that is greater than 99.9 percent and multifactor authentication to ensure that your data is protected. Consider features that allow customization, such as color-coding to aid in identifying documents during internal meetings, or at-a glance reports that provide C-suite executives with a high-level overview they require.

A VDR is used most often in M&A transactions, when potential buyers examine a variety of documents for the companies that are being sold. M&A virtual datarooms facilitate an efficient due diligence process, and reduce risk because they limit access to confidential information only to those who require to see it. When negotiating an M&A deal, users can also benefit from the VDR’s Q&A section and comments. This increases efficiency and speeds up decision-making. Moreover, M&A VDRs enable you to have complete and thorough audit trails, which are a must for M&A due diligence.

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