Deal or no deal? – Virtual Data Rooms

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Virtual data rooms
Virtual data rooms

Virtual data rooms have revolutionised corporate transactions in an unprecedented manner. Through their unique offering of a secure environment in which to share and collaborate on information, virtual data rooms have allowed businesses around the world to cut costs, save on time and increase deal efficiency.

While being a relatively simple concept, virtual data rooms rely on numerous procedures and protocols to ensure they are secure from any current and future threats that the increasingly digitised world may pose. Threats to transactions such as mergers and acquisition have evolved from being largely external, hacker-like threats, towards internal corporate espionage-like threats. Virtual data rooms not only protect the physical data from virtual attacks, they also protect the information from unwanted eyes by using various proprietary techniques such as watermarking or data fencing that allows you to control exactly who sees what information and when they see it.

To understand how virtual data rooms offer value to businesses, we first have to understand the concept of a secure data room, its uses and how virtual data rooms have evolved to mirror the changing nature of global business and social trends over the last 20 years.

Virtual data rooms evolved out of physical rooms that acted as secure data rooms for corporate transactions, deals, audits or any other business process that required the sharing of sensitive company information. Having a secure room allowed both parties to the transaction to monitor and control the documents for the entire duration of the deal. In times before the internet and cell phones, physical data rooms provided adequate security and control for businesses despite being inconvenient and turning collaboration on deals into a costly process.

With the global shift towards digital business and the rise in prominence of smart phones and the internet, ensuring the security of company data became a real issue. Even the most secure email server can’t prevent recipients of a document from copying and sharing it with whomever they please. Digital business meant global business – consumers and companies from different countries could interact and transact with ease, yet deals still required executives to fly backwards and forwards in a costly never-ending cycle.

Virtual data rooms arise from this very need for a central, online location through which data could be shared and controlled at any time of the day. Employees can sign into the platform and engage with various stakeholders in the transaction with the ease of mind knowing that the data is encrypted and cannot be downloaded, captured or shared without explicit permission.

Security of data is ensured across various levels and at all stages of the deal. Firstly, virtual data room providers will make use of multiple data centres, often stored in different locations to prevent data loss in the event that one goes offline. Storing data in separate data centres also allows for a higher level of security and encryption to be implemented. When combined with cloud storage, virtual data room providers can guarantee the safety and security of data 24/7, putting businesses at ease and allowing them to focus on generating and closing more deals.

The data is then accessed through single sign-on secure data rooms, access to which is provided by the company sharing the information or facilitating the deal. Bidders gain access to the virtual data room and, depending on the level of viewing permissions granted to them, can view and discuss documents pertaining to the deal. The flexibility of access permissions means that as a deal progresses, bidders can be granted more and more access to information without having to compromise the deal as a whole. Bidders who drop out will have their permissions revoked and will no longer have access to the data. This is ensured by preventing file download and file sharing or by watermarking each page of information with details about who is viewing it so that breaches can be easily identified.

Secure virtual data rooms ensure that documents never leave the confines of the online platform and so are never physically stored on parties’ devices, decreases the risk of hacking or data corruption. Being purely virtual also allows deals to be worked on from any device with an internet connection anywhere in the world. This has huge implications on both productivity and costs. Increasing the ease of collaboration and discussion greatly shorten the amount of time taken to close deals, allowing business to take on more and more deals and eventually grow themselves. The very reasonable costs of utilising a secure data room and the lack of the need to fly employees all over the world allows costs to be reined in without hampering efficiency.

The multitude of virtual data room providers each offer tailored services than can meet the needs of a wide range of business from the smallest home-run business to the large-cap corporates. The ability to personalise and brand the online platforms allows the secure data room to be seamlessly integrated into the image and existing processes of the business.
24/7 service is provided by most corporate providers if any issues arise with the virtual data room, and some providers will offer training to employees on how to use the platform and ensure compliance with data regulations. The reputation and popularity of virtual data rooms is evident in how many businesses now use them for large deals and even day-to-day running of the business.

Some people have even gone as far as to say that virtual data rooms are nullifying the need for physical office spaces and paving the way for the virtual office, where employees collaborate over the internet, reducing fixed costs and boosting productivity simultaneously. While virtual office spaces may still be a few years or even decades away, virtual data rooms are definitely here to stay and have found prominence in every industry, not just those limited to finance and accounting.

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