Back in the day (not so long ago), data was stored on a server that resided in a physical data room. While the physical data room stored the same documents that a virtual data room contains, its effectiveness and efficiency were limited by its location, and users of that information had to go to the actual data room or wait for couriers to bring the information to them.

Fast forward to today, and companies are using virtual data rooms for the storage and distribution of information and documents. They can provide vendors, advisers, or bidders up-to-date documents via an extranet for which they control and limit access.

Like most technology, virtual data rooms and their use have evolved quite rapidly, largely because of the positive experiences of all parties using the service. They’ve increased their functionality to include facilitation of content management, workflow, and the increasingly important role of analytics. VDRs allow interested parties in a merger & acquisition deal to view confidential information. Discussions can happen via Q&As and updates are managed within one platform.

The secure distribution and sharing of confidential documents no longer occur in the internal IT department, but rather, in a virtual, dynamic environment.

Which Businesses Benefit Most From Virtual Data Rooms?

Businesses that require secure access to data on a 24/7/365 basis, especially during confidential negotiations and transactions, find that virtual data rooms (VDRs) provide full control and security as an online meeting place to facilitate a deal.

VDRs are increasingly popular in a variety of industries including but certainly not limited to biotech, investment banking, energy, and pharmaceutical. These online data repositories are used to facilitate due diligence related to loan syndication, private equity, and mergers & acquisitions.

What is the Most Common use of Virtual Data Room Services?

VDRs offer the same convenience, cost, and scalability as the public cloud with at least one critical difference – the overriding importance of security, This is especially true when a VDR is being used when a merger or acquisition is being explored between two companies. In this instance, the due diligence process is conducted in a more interactive manner and in real-time.

 

 

What are the Primary Features and Functions to Look for?

Since the primary purpose of VDR software is to assist both the selling side and the buying side in a deal to examine relevant documents to assess risks, the best virtual data room services include military- level security like data encryption, account theft prevention, print screen button disabling, and multi-step login authentication.

There should also be an activity tracking and audit log, multi-language support, multiple files format support, and digital rights management. A typical online data room will allow numerous projects within the same VDR and will be compatible with and provide secure access from mobile devices since much of today’s business is conducted via smartphones and tablets. MS Office integration is critical as well.

While all VDRs are a repository for documents and information, they are not all the same. Some offer the most basic of services which include access, but no customer support or training. At the other end of the spectrum, there are full-service offerings that provide formatting assistance, data updating, and 24/7/365 access to support teams. The extent of cybersecurity protections can vary as well.

What are the Advantages of Using Virtual Data Room Services?

In addition to the security features that are designed to protect critical financial data and transactions, the ease of use is a key advantage to VDRs. The fact that multiple people can be granted access at the same time eliminates the need for travel to meet in person to view and discuss sensitive information. Deals occur more effectively and efficiently while you maintain control of the process.

VDRs are critical to the management of the legal, regulatory and compliance documentation required in the scrutiny of corporate transactions and the increasing litigation associated with them.

Not all virtual data room services are created equal, and they are not the same thing as simple cloud storage or basic online data sharing.

What Questions Should I Ask When Choosing a VDR Vendor?

With the proper VDR service, you’ll maintain control of the process, minimize disruptions to the deal, gain credibility, and avoid surprises. With so many providers to choose from, the best way to narrow it down is to do your homework and then ask the right questions.

Homework:

  • Study virtual data room comparisons.
  • Pay attention to the reviews.
  • Note the features that are provided, focusing on those that are functionally required by your project.
  • Ensure support extends beyond normal business hours to 24/7/365 coverage. You don’t want to have to worry about time zones.

Questions:

  • Ask about the service’s security protocols. Aside from the expected data encryption and virus protection, they should have in place time and IP restriction, multiple-factor authentication, and dynamic watermarks to prevent photographing or printing of sensitive documents.
  • To ensure the provider doesn’t outsource data center storage, ask them where their data centers are. Choosing a virtual data room service with in-house hosting adds an additional layer of security.
  • Inquire about free trial offers. Most reputable VDR services off free trial subscriptions ranging from 1-3 months.
  • Ask the nature of transactions in which they have assisted. Experience with financial transactions and IPOs speaks to their qualifications.
  • Does the VDR service offer real-time reporting capabilities?
  • Can they provide activity tracking and audit logs?
  • Do they offer version control including email notifications?
  • Ask if they can customize the platform to your requirements.
  • Which web browsers are compatible with the program?
  • Is document e-signing available?
  • Is a disaster recovery plan in place and up-to-date?
  • Do I need a technology background to manage my virtual data room?

In the world of virtual data room services, price isn’t the only consideration. Additional critical aspects like data security, available features, required functions, and bandwidth should all go into your decision-making process.