What Is a Virtual Data Room?

A virtual data room is a tool that provides secure, central storage for digital documents. It allows users to share information with external and internal stakeholders. Document version tracking and improved security are also possible.

Investment bankers utilize VDRs to conduct due diligence in M&A transactions. These transactions usually require multiple parties to look over large quantities of confidential documents. They must be able to quickly upload and review these documents for a deal to close and they need reliable storage space for the sensitive data. A VDR with clearly defined folder structure and robust controls for access to documents that can be immediately removed if the deal fails making it easier for them to do so.

VDRs can also serve to audit regulatory filings and audits which require open communication between internal stakeholders as well as external regulators. These projects often require long collaboration between teams across different time zones and locations. A specially designed VDR makes it simple to collaborate, monitor activity and communicate with the stakeholders on a project by project basis without the necessity of emails or meetings.

When selecting a company to work with look for features like drag-and-drop as well as bulk uploads of files and support for the most popular extensions. You should know the degree of physical protection the company provides, which includes offsite backups and redundancy. You should also check whether they provide the ability to apply dynamic watermarks on printed and viewed documents or set access restrictions for specific IP addresses.