Virtual data room

Article - Virtual data room


      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.
       An alternative to the physical data room involves the setting up of a virtual data room in the form of an extra-net to which the bidders and their advisers are given access via the internet. An extra-net is essentially an Internet site with limited controlled access, using a secure log-on supplied by the vendor, which can be disabled at any time, by the vendor if a bidder withdraws. Much of the information released is confidential and restrictions are applied to the viewer’s ability to release this to third parties (by means of forwarding, copying or printing). This can be effectively applied to protect the data using Digital Rights Management.
       In the process of Mergers & Acquisitions, the data room is set up as part of the central repository of data relating to companies or divisions being acquired or sold. The data room enables the interested parties to view information relating to the business in a controlled environment. Confidentiality is paramount and strict controls for viewing, copying and printing are imposed.