A data room or virtual dataroom (VDR) is an secure place to share confidential information. A modern-day version of a physical room where documents in hard copy would be kept for a review during sales or buying negotiations Data rooms are typically used to aid in legal and financial due diligence.

They are utilized by businesses of all sizes, and are particularly helpful for SMEs with team members scattered across the world. In the past, large companies might have opted for more expensive in-house solutions however, as VDRs continue to improve and be made more accessible, they are increasingly being used by SMEs too.

When to make use of a data room

A data room can be beneficial at any time in the business cycle, but it is usually used during M&A operations or other sensitive processes that require confidentiality. Venture capital firms, for instance typically need to look over contracts and other documentation before closing an investment. This can be done through a virtual dataroom, which has access granted to attorneys and other stakeholders.

A data room that is prepared can assist an organization prepare for due diligence by uploading documentation earlier and making it available before third-party parties are invited in. Some data rooms provide redaction tools which can be used to effectively and quickly remove sensitive information from documents prior to sharing them – this reduces the risk of an embarrassing mistake that could jeopardize the deal.

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