Data room software, commonly known as a virtual data room, is an online document repository for secure data storage or management.
Virtual data rooms are a product of cloud computing technology that entered the business world about 15 years ago. At first, it was mainly employed for regulating or facilitating mergers and acquisitions, especially due diligence processes, but later it became a critical business asset in the corporate world.
So what exactly is online data room software, how does it work, and what is its role in due diligence? Read to get your answers at https://www.idealsvdr.com/data-room-due-diligence/.
What is virtual data room software?
Virtual or online data room software, as mentioned above, is a cloud-based document storage and management repository where you can store documents, files, images, software, patents, videos, and other intangibles.
Virtual or electronic data room software is not limited to a specific business or professional. Any organization, government agency, company, firm, or professional from any field can use the data room for multiple reasons.
The reason why online data rooms are famous in the business world is not just because of its data storage features. It is a complete business solution that combines data management, online communication, and project management features.
That said, with the help of a data room, a large number of users can communicate on one central platform. They can conduct online brainstorming sessions, share or annotate documents, arrange formal meetings via audio and video conferencing tools, and conduct complex business deals at ease.
Regarding VDR usage, M&As are the biggest use case of data room software. In fact, some of the best virtual data room providers like DealRoom, iDeals, FirmRoom, Merrill, and Firmex offer specialized due diligence virtual data room services to facilitate M&As, fundraising, initial public offerings, litigation, or real estate trades.
How does a virtual data room work?
As virtual data rooms are digital platforms, you can use them as your remote document storage tools.
You can keep all your documents in one place and categorize them the way you want. Virtual data room access is possible from desktops, mobiles, tablets, or laptops. That means you don’t need on-premise databases to run your business. Here is what else a data room allows you to:
- Add or remove other users in the data room as per your needs
- View, edit, annotate, change or alter your business or personal documents
- Share data with other users in your data room. They can be your employees, partners, investors, advisors, or third parties.
- Schedule, plan, and arrange online meetings with your business teams or the above-mentioned parties
- Use VDR chat messenger for formal or informal communication rather than using other insecure apps
Most importantly, you can do the things mentioned above from your mobile phone.
In a nutshell, data room software allows you to keep your business data in your pockets. If you mistakenly delete documents, you can easily recover from the backup offered by virtual data room providers.
Benefits of a due diligence virtual data room
1. Easy access to due diligence documents
Target or seller companies upload due diligence documents in the virtual data room and then invite the buyers. The acquiring companies don’t have to send their due diligence team to the seller company’s premises as they can access required documents anytime, from any part of the world.
2. Data security
If the target company shares its documents online, how can it protect sensitive data from being misused or stolen? Online data room software makes sure that the target companies can exercise 100% control over their data in the VDR.
The seller company can decide who can or cannot access specific data and for how long. Buyers can be restricted from copying, downloading, printing, editing, or scanning restricted documents.
3. Real-time communication
Communication is a core element in the due diligence process. Buyers can approach the representatives from the target company via different means. For example, the data room has HD video and audio conferencing tools to facilitate meetings.
Apart from that, Q&A modules are the most effective communication tool for M&As as they help buyers to ask questions and get answers in real-time. One-to-one communication is also possible via data room messenger.
4. Faster M&A deals
Virtual data room software gives you the luxury of negotiating or dealing with multiple potential buyers at a time. Just upload all due diligence documents from your main account, create separate data rooms for the buyers, share documents, and close the deal with the best offer.
Virtual data rooms were first employed for M&A (due diligence), and it is the biggest use case of this technology to date. That’s because data rooms make due diligence safer and faster. Some of the best data room providers for due diligence include iDeals, DealRoom, and Merrill.
However, it is highly recommended to invest time and money in a high-end due diligence virtual data room for secure and fast proceedings. Most importantly, data room comparison must be an essential step in searching for the right data room services. So if you consider utilizing a data room for due diligence, be sure to compare virtual data rooms on your own and independently decide on the best solution.
Leave a Comment