Virtual Data Room: High Demand Services in Modern Reality

According to studies, content and project management software were amongst the top 10 high-demand business solutions in the world.

Content or data management is an integral part of any modern-day business. Fortunately, virtual data rooms provide companies with 2-in-1 services, including project and data management. That is why dataroom software market has grown tremendously in the past few years.

Is it just data or project management that made virtual data room software a highly demanded solution? Virtual data rooms have gone further than that, and today’s discussion is all about the impact of virtual data rooms in the business world.

What is an electronic data room?

An electronic or online data room software is a blend of multiple features. A business, professionals, or corporations of different types can use a data room for:

• Safely storing its confidential or routinely-used documents in one place
• Ensuring seamless and threat-free communication and collaboration between its employees, project teams, investors, and stakeholders
• Executing large-scale business deals that may include acquiring fixed assets, mergers, acquisitions, fundraising, initial public offerings, and other financial transactions

Virtual data rooms are diverse business solutions that can cater to the needs of various business industries.

In fact, data room vendors nowadays have dedicated solutions based on the unique needs of different sectors. For instance, we have due diligence data room software that is particularly designed for mega business transactions like mergers and acquisitions, initial public offerings, and real estate transactions.

Industries that use data room services: Benefits of VDRs

As mentioned above, corporations and enterprises use online data rooms for high-scale transactions like M&As, real estate, asset acquisition, IPOs, etc. Here are some very common use cases of VDR software.

1. Mergers and Acquisitions, Due Diligence

It needs no confirmation that mergers or acquisitions are the longest and highly data-oriented business transactions that can last for months (depending on the acquisition size). That is mainly because of the voluminous amount of data sharing and analysis.

Acquiring a firm or a business means the acquiring company will go through every single document vital to the company about to be acquired. Acquiring a small business is one thing, but buying an enterprise is totally different.

Just about a decade ago, most organizations had paper documentation systems which made it very difficult for acquiring companies to visit seller’s databases again and again for due diligence. Apart from that, the organization’s data in dispersed form added problems for project management teams in M&A transactions. All of this made due diligence a long process with maximum chances of human error.

Virtual data rooms and M&A due diligence

The first and the most important thing about virtual data rooms is that they are cloud-based solutions — a centralized data storage facility. Data centralization solves half of the problems of project management teams. They can access all the required documents in one place.

The second biggest barrier in M&A deals is the lack of communication between concerned parties. Virtual data rooms provide a secure platform where buyers and sellers can communicate in different ways, including audio or video conferencing, live Q&A sessions, group discussions, live polls, and private messaging.

Apart from that, data room software makes it easy to share documents and add private or public annotations to them. Most importantly, sellers can control the flow of data sharing in the VDR. They can decide which documents should or should not be accessible to buyers. Sellers can also add or remove multiple buyers at a time.

No wonder mergers and acquisitions are the biggest use case of online data room software.

2. Commercial Real Estate Deals

Real estate companies use virtual data rooms for residential, domestic, and commercial estate transactions. The due diligence process in commercial deals is more intense and complex than other types of transactions. That’s because the firm or the real estate agent has to collect every single piece of information on the property itself. Then comes legal requirements, contract/agreement preparation, and of course, communication with both sides.

Real estate firms have to make sure all the property documents are legal and updated. Moreover, they need to ensure that all the interested parties have complete access to property documents. Using a virtual data room, a firm can deal with multiple potential investors/buyers simultaneously and share data as per their needs.

Apart from that, virtual data rooms are helpful in secure 24/7 communication between sellers, buyers, and arbitrators (realtors). Buyers can ask live questions from sellers or realtors, arrange audio or video meetings, request explanations on ambiguous documents and add notes or annotations, etc.

Another good thing about virtual data rooms is that sellers or realtors can use NDA templates in VDRs to control the unauthorized spread of important information. NDAs or contracts can be signed within data rooms with the electronic signature feature.

3. Capital/fundraising

Capital or fundraising is another complex financial transaction that goes on for weeks or sometimes months. Fundraisers need to ensure that investors have maximum access to required documents, but at the same time, they need to make sure that the data is not copied or stolen by potential investors.

Virtual data rooms can be used to store all the documents and give 24/7 online access to potential investors. The best part, fundraisers can add numerous investors at the same time. Fundraisers can answer queries from them, arrange meetings with them, ask them to sign NDAs, control the flow of data sharing, restrict any investor from accessing specific files and folders, and whatnot. Lastly, VDR audit reports can provide minute details about every activity in the VDR, making the transaction more transparent.

In addition to that, virtual data rooms are used for:

• Regulatory risk management
• Legal document management
• Joint ventures
• Strategic partnerships
• Clinical trials
• Investment banking
• Consultancy services

Summing it up

Virtual data rooms are one of the most in-demand business solutions because of their diversity. They are used as data management and project management software, while many companies use them for business transactions and safe communication. It is rare to find such diversity in any business solution.