A data room, also known as virtual data room (VDR), is a safe repository for sharing sensitive information. Data rooms are the contemporary analogy to physical rooms where documents were hardcopies kept to be reviewed during negotiations to purchase or sell. They are commonly utilized to aid in the process of legal and economic due diligence.

Businesses of all sizes use them and SMEs with team members spread across the globe find them particularly beneficial. In the past, large firms might have preferred more expensive in-house solutions but as VDRs continue to improve and become more accessible, they are increasingly being used by SMEs too.

Utilization of a Data Room

A data room is beneficial at any point in the business lifecycle. However, it is most often utilized in M&A or other sensitive processes that require confidentiality. For instance venture capitalists often require a review of contracts and other documentation of a startup prior to closing an investment. This could be done in an online data room that has access granted to lawyers and other stakeholders.

A data room used for preparation can also be used to help an organisation get ready for due diligence by having documents uploaded early and ensuring it is available before any third parties are invited in. Some data rooms include redaction tools that allow you to quickly and easily get rid of sensitive information prior sharing documents. This lowers the possibility of making a glaring error which could affect any deal.

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