What Are Virtual Data Rooms?

A virtual data room (VDR) is a secure, cloud-based system that lets businesses store and share documents online. Most VDRs include robust encryption technology and access control systems, offering the security of a digital fortress, which protects sensitive data from unauthorized access. VDRs can help to streamline processes, speed deals and improve effective communication.

VDRs are typically employed in mergers and acquisitions where parties exchange large quantities of documents during due diligence prior to making a big deal. VDRs can help make the process of M&A significantly faster and more efficient by eliminating the need to mail physical documents or travel to meetings.

VDRs are also useful in strategic partnerships, in which parties collaborate to develop new products or expand an existing business. It is often difficult for partners to gain access to data without divulging sensitive information or triggering a compliance violation.

Security is the most important factor to consider when selecting the best VDR regardless of whether it’s to be used for due diligence, M&A or internal collaboration. Many modern VDRs offer multi-factor authentication, advanced encryption in transit and at rest, audit logs and other security measures to minimize risk. They also provide features such as watermarking, disabled printing and blind view to guard the privacy of confidential documents. This ensures that only authorized users can access the document, and also shows a commitment to data integrity. The best VDRs also provide data on file activity and users that can be accessed by administrators for accountability.