Many users are wondering how a VDR service differs from a virtual data room. There is no difference. They are simply two different terms. VDR service stands for the abbreviation of „Virtual Data Room“. However, one distinguishes real data rooms from virtual.
Data room as a physical room in a neutral place
A data room is a physically protected room in which a collection of documents is kept in the M & A transaction for the purpose of due diligence (DD). In this data room, all documents which may be of interest to the buying company are provided. Other applications of data room are large projects, such as real estate, where project participants exchange documents, plans, invoices, meeting protocols, etc., and work according to specific rules. The data room is usually set up not in the company, but in a neutral location, eg the lawyer representing the company. Likewise, virtual data rooms are possible. In general, a data room is used to securely store all confidential documents in an M & A transaction.
Virtual data room as a web-based cloud solution
In the case of a VDR (virtual data room), this is therefore nothing more than a service which makes the above-described services virtually online. The documents are made accessible by means of web-based browser interfaces, which allow the creation of the files in a folder structure. Furthermore, the virtual data room also allows due diligence in the context of M & A transactions. This is understood as a risk assessment of a company – above all, the audit is carried out with regard to its economic, fiscal, legal and financial circumstances. This process can be carried out virtually more easily, since the users are not under a time pressure and can access the necessary documents at any time. In this context, it should be noted that the VDR has also proven itself in data management. This is mainly due to the fact that with a functioning Internet access all data can be viewed at any time and from any location. Furthermore, the digitization of the documents ensures that both time and money are saved during the processing of the documents. For this reason, a number of companies now prefer VDR services.
What are the application areas for data rooms?
Service described is not only used in the context of M & A transactions. The VDR is used above all in private equity as well as credit syndication. These services enable this service to be used in many industries. The virtual data room is very popular in the following divisions:
- IT and telecommunications
- Investment Banking
- Venture capital
Security requirements for virtual data rooms
The main task of a VDR application is to keep all data secure, manage it, and share it with other participants in protected mode. In order to provide its users with a high level of security, many companies offer a variety of advanced features. This has proved particularly successful in the case of login authentication, which is divided into several levels – this ensures that unauthorized persons do not have access to the virtual documents. In addition, some vendors have the opportunity to learn how to use the databases properly. This ensures that users in the virtual data room maintain maximum security. For a safe use of this service, an IP- and time-limited access and dynamic watermark are provided.
Find the right provider for data rooms
In the meantime, some vendors who provide their VDR service are available to interested parties. However, the decision for a particular company can be difficult. Particular attention should be given to the services provided – this is the only way to ensure that you find an offer that meets 100% of your personal needs. In any case, a VDR service should include the following:
Secure document management
Professional search on all document indices and content
Web-based rights management
Logging of user activities
Manage multiple DD projects with the same account
Approval of different file formats such as PDF, XLS, DOC etc.
Determine the purpose of the virtual data room