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Everything you need to know about data rooms

If you've ever wondered what is a data room? then this is the guide for you! We'll explore the basic traits and uses of a VDR.

Generic Room with Question Icon

Key takeaways

  • Used mostly in mergers and acquisitions
  • More secure than other file-sharing platforms 
  • Used in compliance-heavy projects 

What is a virtual data room? 
A virtual data room (VDR) is technology that allows companies to securely store their documents and grant different levels of document access to either internal or external parties who are looking to either review or utilise those documents.

Everything in a VDR is fully tracked for compliance reasons; meaning a report can be pulled on uploads, access and permission settings. There are various other features of a VDR, which are designed to make the sharing of confidential information as easy and secure as possible.

What are data rooms used for?
The most common use-case of virtual data room/physical data room is for a merger or acquisition (when one company is looking to buy another one). The selling company would set-up a VDR, with their advisors (Legal and Financial) and upload their documents to the room. They would then invite their potential buyers into the room to review the documents, this could be a single buyer or several buyers simultaneously. Companies can grant different levels of access to each in the data room depending on the confidentiality of the documents. They can also monitor which documents each bidder is looking at, and offer them the opportunity to ask questions directly from within the VDR.

What are the features of a data room?
Data rooms exist to move projects along smoothly and easily. They achieve this through smart features that help with organisation, knowledge gathering and more, some of these are:

  • Drag and drop file management and upload
  • Reporting
  • Full text search
  • Q&A
  • E-mail
  • Redaction
  • Customised permissions

Are there data room alternatives?
Most of us are familiar with cloud-based file sharing, for example as consumers we might share files with a platform like Dropbox. While services like this serve a purpose, they lack the security bespoke features needed to manage projects like an asset sale.