A data room, also known as a virtual dataroom (VDR) is an secure place to share confidential information. A modern-day version of physical rooms where hard copies of documents would be stored for review during buying or selling negotiations Data rooms are typically used to aid in financial and legal due diligence.
They are used by companies of all sizes, and are particularly beneficial for SMEs who document management may have team members scattered across the globe. In the past, larger companies may have opted for expensive in-house solutions. However, as VDRs improve and become more accessible, SMEs are also adopting these devices.
Utilization of a Data Room
A data room can be beneficial at any stage of the business lifecycle, however it is typically utilized during M&A activities or other sensitive processes that require confidentiality. Venture capital firms, for example typically need to review contracts and other documentation before closing an investment. This can be done in a data room that is virtual, with access granted to attorneys and other stakeholders.
A preparation dataroom can also help an organisation prepare for a due-diligence process by uploading documents early and making it available before third-parties are invited in. Some data rooms include tools for redaction that allow you to quickly and reliably remove sensitive information before sharing documents. This lowers the possibility of making a costly error that could sabotage any deal.