There were more than 16,000 merger and acquisition deals in early 2018. The number has only continued to grow. Most business leaders were optimistic about continued M&A growth into 2019.

M&As are often complex deals, which require plenty of paperwork. Business leaders have been looking for better ways of collecting all those documents. One solution is the virtual data room.

What is a VDR and how can it be useful? Our guide to VDR will bring you up to speed.

What is VDR?

VDR stands for “virtual data room,” which is a digital space used for document collection. It’s helpful for uploading documents and keeping them together in a library of sorts.

It’s easy to see how this would helpful for complex purchases, like M&As or venture capital transactions. Users upload the relevant documents, which are then stored digitally in the “room.”

Anyone with access to the room can then review the documents. Since the paperwork is together, it’s easy to reference important information.

So far, VDR has been largely limited to complex business transactions. It’s replacing the physical “data room,” which was used to achieve due diligence in these processes.

Advantages of Going Virtual

The physical data room allowed participants in M&As and venture capital transactions to conduct due diligence. It was paper-intensive and expensive. Since the room existed in one location, it also meant interested buyers or bidders had to travel to the room.

VDR makes it easier for people all around the world to take part in the process. The virtual room can be accessed 24/7, which means time zones are no longer an impediment.

In essence, VDRs open up bidding processes to people around the world. It also improves understanding, since participants have more access to information.

Companies that use VDRs in their transactions see speedier transactions and more involvement. Better yet, it’s a more cost-effective process too.

What about Security?

Many business leaders are thinking more about security these days too. The documents involved in M&A and VC transactions often contain sensitive information. Is it wise to put them in a digital environment like a VDR?

Most VDR providers go to great lengths to offer a secure environment. In most cases, VDRs are an improvement over the physical data room.

For instance, information can’t be downloaded from a VDR. It can only be viewed by users. As an added measure of security, users have to have the correct permissions to even view the room.

Other security measures like firewalls can help keep documents and information even safer.

Go Virtual for Your Next Transaction

VDR is becoming more popular for complex transactions, and it’s easy to see why. Whether between a venture capitalist and a start-up or a new homeowner and their real estate agent, transactions are easier with VDR.

If you found this VDR guide useful, you’ll find plenty of other great information on our site. Discover more about the technology at your fingertips.


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