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Virtual data room

(also VDR, virtual deal room, virtual data repository)

Virtual data room definition

A virtual data room is a secure online platform used for storing and sharing sensitive data — in effect, a digital counterpart to traditional physical data rooms. Virtual data rooms are used often in business transactions (particularly in mergers and acquisitions), legal processes, and corporate governance.

How virtual data rooms work

A virtual data room allows administrators to carefully control who can view, edit, download, or print specific documents. User interactions are meticulously recorded for compliance and accountability purposes.

The documents themselves are typically encrypted (both at rest and in transit) to protect them from unauthorized access. Most virtual data rooms enforce version control to make sure that users only get the latest, most-up-to-date version of each document. To help authorized users find what they need, virtual data rooms are also frequently indexed and include search features.

Mirroring their physical counterparts, virtual data rooms often have tools for hosting question and answer sessions, holding discussions, and exchanging information. To streamline the document-sharing process, users can also upload and download documents in bulk.

Virtual data room use cases

  • Mergers and acquisitions (M&A): Data rooms facilitate the secure exchange of confidential documents between the acquiring and target companies, as well as potential investors.
  • Virtual data rooms are used for due diligence processes, letting parties safely review sensitive aspects of a business or property without outside interference.
  • Startups and businesses seeking investments use these virtual facilities to share business plans with potential investors.
  • Legal teams can safely share sensitive documents involved in litigation, regulatory compliance, or other legal proceedings in a virtual data room.