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.
Disadvantages of a physical data room
Time consuming
Narrow bandwidth
Expensive
Cost of travel
Paper intensive
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
Increased bid throughout (and time zone access) if the virtual data room is accessible 24/7 over the allowed period
Increased control and understanding of bidders
Increased speed of transactions owing to improved accessibility
Information cannot be downloaded and taken away in a true Virtual Data Room – only viewed by a user with the correct permissions
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.