5 Best Ways to Use a Virtual Data Room

Virtual Data Room

Virtual data rooms have secured a place in major financial and non-financial transactions and processes in the business sector. Although data room software has become an integral element of many industries, especially M&As, people still believe that these are just data repositories where you can store some business-related content.

However, a virtual data room is far more than that, and businesses from different sectors are using online data room software for various purposes. Today, we are going to enlist the top 5 uses of virtual data rooms.

Top 5 ways to use a virtual data room

1. Real estate transactions

Real estate firms or agents can utilize electronic data room software in many ways. The real estate business revolves around tons of data, marketing, and relationship building. Just a single real estate transaction goes through multiple phases.

A realtor must have information about current tenants and owners of a property, its architectural drawings, lease agreements, and other legal documents. Imagine maintaining these types of records for hundreds of properties.

Apart from that, real estate firms have to keep updated lists of active investors, properties available for rentals, potential tenants, the firm’s own marketing plans, financial records, etc. Can you imagine the amount of data that is?

Due to this, realtors can use a virtual data room as:

  • Data repository to store and organize their business-related data in the best possible way.
  • A secure virtual deal room to directly deal with the owners and tenants. They can arrange video meetings and tours of the property, answer all queries from both sides, verify all necessary documents during due diligence (which is a legal obligation as well), and get documents signed by concerned parties.

2. Investment banking

Investment banking is a sub-branch of banking business that particularly deals in raising capital. Investment banks work as intermediaries; they connect businesses, corporations, governments, and other organizations with investors.

These banks help raise capital, sell securities on behalf of companies, intermediate broker trades, and assist in stock purchasing. All the above-mentioned transactions involve loads of data handling.

Businesses trust investment bankers to trade or act on their behalf, and doing so means the banks have to go through massive volumes of data, brainstorming sessions, data analysis, negotiations, and regular communication.

Thanks to virtual data rooms, investment banks can:

  • Add investors and sellers to data rooms
  • Request concerned organizations to share necessary documents on VDR
  • Access documents from anywhere, anytime.
  • Ensure 24/7 communication with all parties involved.
  • Prepare contracts or agreements and get them signed electronically
  • Keep each and every transaction transparent

3. IPOs and fundraising

Initial public offerings or fundraising are cumbersome business activities. That is because when a company goes public to raise capital, it has to convince investors by sharing all-important corporate documents, which also increases data security concerns. Therefore, it is important for the company to have complete control over its data because this process may go on for weeks.

Virtual data room software gives corporations control during the data sharing process. Thanks to VDRs, IPO companies can:

  • Store all documents in one place — a centralized data repository
  • Give customized access to potential investors
  • Request investors to sign NDAs
  • Make data public for as long as they want
  • Ensure maximum communication with interested investors

4. Mergers & Acquisitions

The M&A industry is the biggest consumer of virtual data rooms, and virtual data room providers have been offering data rooms (deal rooms) developed specifically for M&A transactions. Just like investment banking or fundraising, M&As involve a lot of data sharing and verification.

Due diligence is the most important and probably the longest part of M&A, which generally takes weeks if not months. During the due diligence process, the acquiring company evaluates and verifies hundreds of documents within the business hours or specified time period.

Virtual data rooms can shorten that period to a great extent. The seller company can upload all its documents in the data room and give 24/7 access to the buyers. Sellers can control who can or cannot access a folder or document, remove or add bidders as per their ease, arrange meetings, and conduct Q&A sessions. The data room management can also record meetings and other important transactions on a VDR.

5. Pharmaceutical companies

Pharmaceutical companies possess data that is highly vulnerable to theft and hacking. Whether it is a medical device prototype, research findings, or a newly developed formula, the company has to make sure it doesn’t fall into the hands of competitors or external parties.

Research and development is an expensive process, and pharma companies have to attract investors or partners, which involves data sharing. Virtual data rooms make sure that the data is safe during these transactions.

Final words

Using trusted data room services in complex business transactions has almost become mandatory now. Data rooms are used in IPOs, fundraising, M&As, investment banking, life sciences, law firms, real estate, healthcare, IT, and other industries. Currently, VDRs are providing unparalleled online data storage and sharing services.

If you consider choosing a solution for your business, you can find the best data room comparison here: data-room-software.org


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