Over time, the development of information technology and the increased volatility of assets created a new need for companies. They needed to provide quick access to data for potential investors and asset buyers, as well as to keep the information provided up-to-date.
A virtual data room (VDR) is a high-security web-based system (Internet storage) where sensitive and confidential documents and information can be stored and shared between clients and third parties in order to conduct quicker and more effective due diligence.
These systems are commonly used during:
- mergers and acquisitions,
- complex transactions and operations,
- bankruptcies,
- reorganizations,
- loans.
Accountants, lawyers, managers, government agencies, banks, financial institutions, buyers and sellers can enter information into VDRs. It is a controlled space that uses rules based on the consent of each party to the transaction for user access. The use of security codes allows access to be denied in the event that a customer refuses a transaction or other changes occur. Check more about data rooms at dataroomreviews.org
Advantages of Using Digital Data Rooms
Digital data rooms allow you to control access, copying, viewing, and printing. All information can be edited, added, or deleted at any time. Here are the main advantages of using digital data rooms:
- Online data rooms open you up to the global marketplace without the need for face-to-face meetings and sending printed documents.
- By taking advantage of the online data room you can make your due diligence more efficient.
- Trade transactions such as mergers and acquisitions (M&A) can include up to thousands of pages of documents that need to be stored, exchanged, read, manipulated and tracked, which is not only time-consuming but also expensive.
- Virtual data room technology creates an online workspace that replaces a traditional conference room filled with boxes of documents.
- Electronic data rooms provide attorneys and legal staff with a way to provide clients and other third parties with important documents and the ability to manage access to them, eliminating the need to fumble with folders filled with paper documents and scanned versions of documents at various email addresses.
In the past five years, online data room services in M&A and similar operations have grown from 5 percent to 50 percent. Individuals who provide such services report an annual growth rate of 200 to 300 percent, and that’s not just in terms of user growth, but also in terms of revenue. With VDR:
- Documents are online and accessible from anywhere with an Internet connection.
- No one has to travel to the location where documents were previously prepared for legal and other audits.
- Nor do they have to provide personal oversight to ensure that documents are not taken out, or copied, or that everything is available for visitors.
Saving costs also means saving time in situations where attendees go on business trips and only find out later on the spot that the necessary documents aren’t available there.
Data Room Makes Your Business Safe
A seller can easily make the planned sale of their business more efficient by conducting their own due diligence.
Selling a company or business is a complicated process that is very time-consuming. Buyers also do not like surprises. If they find inconsistencies, risks, or other complications when doing their own legal, tax, financial and technical due diligence, they react negatively to such circumstances. This can be avoided by conducting your own seller due diligence, which will help you learn about all of these issues, address them, and thus make the deal happen faster and more reliably.
Increase your profits
Due Diligence of the company and company to be sold, by preparing virtual data room solutions and controlling the documentation of the company, the seller can obtain a higher selling price. He can maximize the value of the company by highlighting its strengths and identifying risks that can be resolved before negotiations with strategic buyers to buy or acquire an interest in the company begin.
Due diligence allows the seller to address any problems with the financial statements. It also helps reassure potential buyers that they are not in danger of finding a “skeleton in the closet” in the future.
Faster and cheaper transactions
Most buyers agree to accept the seller’s due diligence instead of the auditor’s accounting reports. Seller due diligence, moreover, can be done faster than an audit and for a lower or comparable price.
Transactions can thus be completed in a shorter time frame and with less uncertainty about what the buyer can learn from an independent legal and accounting investigation.
Security guarantees
The use of documents in the data room has great security guarantees. Participants in the operation must register in the data room by entering their password, and have different rights to access the documents.
Some people who have access to the data room software will only have the right, for example, to read the document online, but will not be able to print or download it, or will only have the right to download it with a watermark. This means that the person who makes the documents available for viewing will not have to physically follow the movement of the documents – the software takes care of everything.
Since the documents will never physically leave the room, they cannot be lost. In addition, even after several years, it will be easy to recover data from the data room, as well as to check who read what documents and when during due diligence.
Conclusion
As the way information is stored has evolved, so have the threats faced by organizations. The use of physical data rooms solved the problem of damaged or lost documents. But cloud storage and other modern file protection technologies must address the issue of access control and management. This is the challenge that necessitated the emergence of virtual data room services.
