A virtual data room is an online repository of information that one can use to store and distribute documents. It is an alternative to the conventional physical data room. Many business owners usually use virtual data rooms to facilitate the due diligence process during private equity and venture capital transactions.
merger and acquisition transactions, and loan syndication.
Most entrepreneurs have traditionally used physical data rooms to accomplish the disclosure of documents. But for several reasons, virtual data rooms are becoming increasingly popular by the day.
The many pros of virtual data rooms have led to tremendous industry growth. This industry grew at a rate of 16.7 percent annually from 2009 to 2014. IBISWorld estimates that it will expand from $628 million in 2012 to at least $1.2 trillion by 2020.
The ever increasing demand for virtual data rooms has prompted an increase in the number of virtual data room providers. Currently, there are only 241 providers of this service, making the demand for virtual data rooms higher than their supply. However, the enormous options of virtual data rooms available today can lead to a lot of confusion as to whether one is making the best choice for their business or not. Here are some of the most important facts about virtual data rooms that you should know to be able to have confidence in your data rooms.
Compare Virtual Data Rooms and Physical Data Rooms
The most apparent difference between these two data rooms is the location of the “room” and the format of the data that each of these rooms contains. A virtual data room, as already indicated, exists online. And the documents that it contains are in a digital format such as Microsoft Excel and PDF. Data in virtual data rooms are securely stored on central servers and can many parties can access it at the same time. Physical data rooms, on the other hand, are tangible rooms and contain data in a paper form that are stored in boxes, file cabinets, and binders. Clearly, in this case, data is stored in physical rooms.
The Benefits of Virtual Data Rooms
Offers Great Convenience
Since it does not require you to use physical materials to construct a virtual data room, you can set up a virtual data room for access within very few days. Furthermore, after setting up a virtual data room, you can have your multiple potential bidders access it at the same time at any time.
You may spend a lot of money when setting up a virtual data room for the first time, but the cost of maintaining the data room is quite low. Virtual data rooms are more cost-effective than physical data rooms in the long run.
These rooms do not require your lawyer to take a lot of time copying and collating hard copies of your documents. Also, virtual data rooms can allow many of your potential clients to access the information remotely,
A virtual data room can prevent potential bidders from being forced to return a physical data room several times. For this reason, it makes it easy to complete the due diligence process.
You can set up virtual data rooms to send emails alerts whenever new documents are uploaded.
This email feature can immediately inform your potential bidders of the availability for review. and help to ensure your bidders access these documents at the right time.
Also, since they make it easier to ensure that no document is overlooked.
Enhance Understanding of Deal Progress
This data room can also gather a lot of useful information on the interest level of different bidders and can indicate any points of negotiation or concerns that arise.
With these crucial aspects of the virtual data room at the back of your mind.
you could find it easier to have complete confidence in the virtual data room of your business.
Virtual data rooms do not only have all the benefits of the conventional physical data rooms such as controlling access.
copying, printing, and viewing but are more much effective and secure.