What is a Virtual Data Room?

Virtual Data Room

A virtual data room is an Internet-based tool that stores and makes documentation accessible to others, with an emphasis on security. Virtual data rooms are often used as collaborative and secure hubs that are designed to assist with the process of an M&A transaction. Other popular uses include asset management and raising finance. Thanks to the security, efficiency, and cost benefits, a virtual data room has decreased the need for its physical counterpart as a method of disclosing confidential data.

A data room is a common part of contractual and legal processes, acquisitions, mergers, and real estate transactions. They typically contain the latest legal data required for due diligence and compliance, along with any data that could interest potential parties, bidders, or buyers to a contract.

A Virtual Data Room in a Real Estate Transaction

Think about the documents that relate to a property auction. These could include an energy assessment,  building photos, liens, tax records, titles, a condition survey, and a site survey. All potential buyers  would want to view these documents for the purposes of due diligence, and right up until the day the auction is scheduled, there may be a need for documents to be either added or updated. One of the roles of a  virtual data room is to ensure that the most up-to-date document be confidentially provided to all potential buyers.

Other Features of a Virtual Data Room

A virtual data room provides restricted access to data with the latest in security technology. They also allow the data’s owner to decide which parties will be assigned access to it and what they are permitted to do with it.

A virtual data room can print commands and block downloads. And they have features that enable their owners to chart and track all aspects of data access. There’s also a Q&A module available, which allows potential buyers to submit questions. The Deal Manager has the option to allow everyone to do this, however

Choosing a Virtual Data Room

A virtual data room is now also used in transactions for large corporations, in addition to smaller deals such as a property auction. With an understanding of the key features of a virtual data room, and certainty in what you’re looking to get out of your data room, you can begin to compare offerings from the various providers. Seeing as good providers generally possess most of the features mentioned above, it’s largely a matter of knowing how a virtual data room works, the kinds of projects they’re specialised for, and prices.

Three of the key aspects you should look at when choosing a virtual data room are user, interface and provider speciality, security, and price. As a general rule, if there’s a particular virtual data room that you’re considering, you should get in touch and ask to see a demo. They will tell you how to use their data room for what you are looking to achieve and will quote you the best possible prices.

Selecting the best data room means balancing security, cost, and other factors of an M&A deal or real estate transaction.  Researching online, especially any websites that review data rooms, is a great place to start.