A virtual data room (sometimes called a VDR) is an online repository of information that is used for the storing and distribution of documents. In many cases, a virtual data room is used to facilitate the due diligence process during an M&A transaction, loan syndication, or private equity and venture capital transactions. This due diligence process has traditionally used a physical data room to accomplish the disclosure of documents. For reasons of cost, efficiency and security, virtual data rooms have widely replaced the more traditional physical data room.
Technically speaking is a series of proprietary extranets that provide an online repository of data. Businesses typically use a secure virtual data room to share critical information with external customers and partners in a secure, online environment. The Virtual Data Room enables parties to view documents relevant to a particular transaction for authorized users. Documents are stored in electronic format on a central server and accessed via the Internet.
Benefits of a virtual data room
The largest financial benefits accrue to the seller although buyers also benefit. For the former, advantages include:
– Improvement in the number of bidders, opening the sale up to more bidders and therefore potentially better sale prices.[1]
– Increased bid throughout (and time zone access) if the virtual data room is accessible 24/7 over the allowed period.[2]
– Increased control and understanding of bidders.
– Reduced cost of the due diligence process overall by eliminating the need to travel, copy multiple physical binders and rent several dedicated physical due diligence rooms.[1]
– Resulting 20%-30% higher bid values.[citation needed]
– Usually more cost effective than physical data rooms.[3]
– Increased speed of transactions owing to improved accessibility.
– Enhanced information secures more deals at higher prices.[citation needed]
– Conventional physical data rooms restrict the bidder or buyers’ ability to get the correct people to the room simply due to the physical location. However, Virtual Data Room opens up global markets for M&A, takeovers and property deals compared with purely face-to-face and hardcopy document transactions (i.e. business letters).
– Information cannot be downloaded and taken away in a true Virtual Data Room – only viewed by a user with the correct permissions.
There are hundreds of virtual data room vendors active in the market, the most popular are:
Ansarada
Box
CapLinked
EthosData
Firmex
HighQ
Huddle
iDeals
Intralinks
Imprima
Merrill Datasite
Millnet
OneHub
RR Donnelley
SecureDocs
ShareVault
V-Rooms
