What is a Data Room?

What is a Data Room?

No one in business would make a major decision without all the facts.

But for significant material events like mergers and acquisitions, tenders, and capital raising, getting all the information can mean combing through tens of thousands of highly confidential documents.

This poses a major security risk to the business. How can the right people review the necessary information, while ensuring it doesn’t get into the hands of the wrong people? By using a data room.

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What is a data room?

A data room is a secure space where confidential documents can be kept and only read by people authorized to access them. When businesses need a secure location to share confidential documents with selected third parties, they use a data room to control who gets to see what. This minimizes risk that their confidential business information will be exposed to unauthorized parties.

Data rooms due diligence then and now

Traditionally, data room due diligence was conducted in a physical room. Today, it happens online in what are called virtual data rooms

Traditional data rooms

A traditional data room is literally an actual room full of documents. Businesses would use a room at their own headquarters, their lawyer’s offices, or a secure location like a bank where they could house documents and control access to them.

Access to traditional data rooms is tightly controlled. They’re usually physically secured, guarded, and closely monitored. 

Virtual data rooms

Now, virtual data rooms are used by companies, advisors, legal teams, investors and auditors instead of traditional data rooms. An essential part of due diligence for material events like tenders, legal transactions, fundraising, and audits, a virtual data room is a secure online place to safely review confidential information.

Learn more: How Secure is a Virtual Data Room?

Why choose a virtual data room over a physical data room

Physical data rooms have major limitations:

  • Searching and reviewing physical documents can be difficult and time consuming.
  • Often only one person or team is allowed in the data room at a time, which means that competing bidders or even specialists on the same team have to wait for access.
  • Keeping deal teams close enough to use the data room can become very expensive, especially if the due diligence process is likely to take months.

Virtual data rooms on the other hand:

  • Can be set up extremely quickly (learn more: setting up a virtual data room)
  • Can be accessed from anywhere by those that have been granted access
  • Unlimited approved users can access at the same time
  • Do not come with the cost of a round the clock human security team, as they live in a secure online environment compliant with ISO27001 (the holy grail of security accreditations)  

To execute more secure deals, much faster - and with better control over multiple bidders - a virtual data room is the solution.

Ansarada Deals takes the virtual data room much further with advanced data room software that streamlines the due diligence process with AI-powered insights. Book a demo to find out more.

What is a data room for investors?

An investor data room is a secure space for the sharing of sensitive information relating to the company in which the investor is considering investing. Data rooms for investors used to be physical rooms, however today they are almost always virtual.

The Data Room Hub

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