The importance of data security increases significantly when one business shares data with another business during transactions. These transactions may include mergers, acquisitions, strategic partnerships, and asset trading. Additionally, regulatory requirements require organizations to implement data protection measures.
When it comes to secure document sharing in business transactions, virtual data room solutions come at the top.
This article explains the data room technology and how it is used in different business sectors.
What is dataroom software?
A virtual data room is an online document repository for professionals, businesses, and government organizations to store, share, and automate the data flow within and outside the organization.
Online data room software provides modern tools for safe and controlled communication. Rather than communicating through emails or other insecure routes, virtual data rooms help users communicate via VDR messenger, group chats, audio/video calls, and Q&A modules (during business transactions).
Virtual data room providers nowadays offer AI-based advanced analytics tools that can be used to track which documents users view most frequently. It helps businesses during business deals as they can determine what buyers are looking for.
Common use cases of virtual data room technology
“Data remains the top intangible asset for organizations, and data security remains the top priority. Besides, the growing regulatory challenges have kept businesses on their toes. Industries using data rooms not only minimize their regulatory hurdles but also gain a competitive edge. Secure data management tools are a confidence booster for stakeholders and the public,” says Ronald Hernandez, VDR expert.
Here is how data room software serves different industries and business processes worldwide.
1. Mergers and Acquisitions
Corporations, enterprises, and other large businesses started using data room software for M&As decades ago. The core objective of introducing VDRs in M&A transactions was to simplify and shorten the due diligence process.
A virtual data room is equally useful for buyers and sellers involved in M&As. That said, buyers can access centralized data storage of the target company remotely, allowing project teams to conduct due diligence at their own pace and convenience.
Sellers, on the other hand, have more control over their important or sensitive business documents. They can control the level of access granted to buyers and protect sensitive documents from unauthorized use. Most importantly, sellers can create multiple M&A data rooms for different buyers and get the best possible bid.
2. Fundraising
Companies usually hire fundraisers to raise capital on their behalf. Fundraisers use virtual data rooms as their primary tool for collaboration with potential investors, clients, and financial or legal advisors.
Using online data room software, fundraisers can provide potential investors 24/7 access to corporate documents, answer their queries via Q&A modules, share presentations, and arrange meetings with concerned parties. The best part is that the management can monitor all activities in the data room.
3. Legal document management
The legal industry stands amongst the biggest consumers of virtual data rooms. Lawyers/legal advisors have access to their clients' highly confidential information and are legally bound to protect data integrity.
Therefore, law firms turn to online data rooms as their primary data storage units. Virtual data rooms offer the most advanced security features available in the digital world, which help lawyers keep that data safe.
Other than that, law firms keep communications with their clients or interested parties safe via virtual data rooms. Data room vendors like Ideals provide lawyers with a massive legal forms library and bankruptcy case management tools.
4. Initial Public Offering (IPO)
A company going public is legally bound to make the required business documents available to the public. That's because shareholders and investors need to analyze the company's previous performance, current status, and future projections.
Presenting confidential data to a large number of individuals is full of risks; competitors can misuse publicly available data.
Virtual data rooms make IPOs much safer for companies. They can ask the investors to sign NDAs or restrict data room users from copying or downloading unauthorized documents. Any data room user trying to misuse or steal a document can be immediately identified and sued in court.
5. Real Estate
Real estate firms also use data room software as their main data storage facility to manage their portfolios, legal documents, prototypes, clients' details, and other sensitive materials.
Apart from that, data rooms are used for online communication and data sharing during real estate transactions. Real estate firms use built-in HD video calling tools for online visual tours of the concerned properties. Documents can be signed electronically (electronic signature feature) within the data room.
Summing it up
The modern-day use of virtual data room software is not limited to mere data storage. Data room services are now used for project management, online collaboration, board communications, and transactions like IPOs, fundraising, M&As, and strategic partnerships.
