A data room is a database where you can store and share sensitive information. This is typically used in transactions, but data rooms can also be used as secure document storage. This, in turn, allows companies to reliably protect important documents, while easily accessing them.
There are two types of rooms: physical and virtual data rooms. There is a significant difference between them that everyone should be aware of. Below you can read in detail about the application of the best data rooms as well as compare virtual data rooms based on the list of the main features and characteristics provided in the article. You can find more here: https://data-room-software.org/
Virtual Data Room
The most common are virtual data rooms. In essence, this is cloud storage of significant data, designed for its protection and confidential use. VDRs facilitate the M&A process by allowing buyers to access data securely and securely over the Internet. The prevalence of such rooms and their advantage over physical data rooms is that they are easier to use, secure, and cost-effective.
VDR features include multifactor authentication, optional questions, and custom permissions. Best virtual data room providers implement state-of-the-art security measures that are designed to protect against hacking by cyber scammers.
Physical Data Room
The physical data room (or data due diligence room) is the actual location that stores the basic data and documents that are needed to complete a transaction. Potential buyers can access it before the deal is done.
Before making a deal, the buyer will want to know more information about the company. For this reason, the seller can store all documents in one physical location, which is completely protected from unauthorized persons.
The cost of maintaining a physical data room can be high. This is due to the fact that in large transactions with the participation of a large number of participants, they must be involved throughout the entire process.
To manage costs, many vendors turn to virtual data rooms, as they allow everyone to access documents remotely. It is also worth noting that VDR is cheaper, which is also an important factor when choosing a specific online data room software.
How Are Data Rooms Used?
The most popular is the use of rooms for transactions. Buyers require access to large volumes of confidential documents that must be stored in a secure location. At the same time, everyone who needs to will be able to access the data.
Virtual data room software makes it easy to share and view the documents required to complete a transaction. In this case, a visit to the seller’s office becomes optional. In addition to being faster and more convenient, it also significantly reduces the cost of the process. You will not only have to process paper documents but also pay for travel and housing for buyers.
Another case may be that when conducting a public sale of shares, a huge number of documents is required. This is because lawyers and investment bankers must sign and verify them. The task is greatly facilitated by the fact that the documents will be stored in an electronic data room. This ensures both their safety and integrity and the convenience of working with them.
Virtual Data Rooms or Physical Data Rooms. What’s Better?
It’s no secret that many companies prefer the virtual data room. What is it connected with?
Price and maintenance cost
Virtual data room services are usually several times cheaper than their physical counterparts. The reason for this is that the company only needs a secure computer network through which to access online documents.
In the case of a physical data room, the company needs to rent a special room for such purposes. Apart from this, you also need to hire security guards to ensure the safety of the data. By itself, this will already cost much more. However, this is not all because, during the transaction, the company assumes the cost of travel, food, and housing for buyers.
In this regard, it becomes obvious that the cost of maintaining the VDR will be much lower.
Data security and convenience
The Virtual Security Room ensures that your data is kept for as long as required. Natural causes will not affect the integrity of the data in any way, which cannot be said about the physical data room. Fires, floods, hurricanes, and other natural phenomena can result in the loss of important documents. Furthermore, do not forget that accessing data using a computer is much more convenient and enjoyable than getting to the place of their physical content and trying to find them in hundreds of other files.
Availability
As already mentioned, it is much more convenient and faster to access data and significant documents using a computer. It also gives access, for example, to investors from all over the world, and they do not need to travel in person to access the information.
Furthermore, worldwide availability increases competition among buyers. After all, with limited availability, competition will be limited by geographic location.