A virtual data room (VDR) is an online tool that securely stores and makes available, uploaded documentation. Quite often, VDR’s are used as secure, collaborative hubs to assist the due diligence process of an M&A transaction. Other common use cases include the raising of capital and asset management. Due to cost, efficiency, and security benefits, the VDR has replaced physical data rooms as a means of disclosing confidential information during a due diligence process.
Data rooms are a common component of legal and contractual processes, real estate transactions, and mergers and acquisitions. They usually contain the up-to-date legal information needed for due diligence and compliance, information that may be of interest to potential buyers, bidders, or parties to a contract.
Virtual Data Room in Action: Real Estate Transaction
Consider the documents related to a property auction. They might include a site survey, condition survey, titles, tax records, liens, building photos, an energy assessment, and more. Every potential buyer would need to see those documents in the interest of due diligence, and up until the day of the auction, documents might need to be updated or added. Ensuring the latest versions of the documents be provided confidentially to all the potential buyers Is the role of the VDR.
Other VDR Key Features
Not only do virtual data rooms provide restricted access to information using the latest security technology, they enable the owner of the information to determine who can access it, when they can access it and what they are allowed to do with it.
Virtual data rooms can block downloads and print commands, and they have features that allow their owners to track and chart every aspect of data access. A Q&A module is available so that if one potential buyer submits a question, it is available to everyone if the Deal Manager has chosen it to be.
Virtual data rooms are now used in large corporate transactions as well as smaller deals like the property auction discussed above.