Virtual data rooms are secure storage facilities which allow users to look over confidential documents in a safe environment during due diligence or other business transactions. It comes with a superior level of security protocols that other file-sharing platforms do not have, such as granular user permissions, encryption at rest and during transit and two-factor authentication for content, watermarking of content and audit trails that display logins and uploads, as well as downloads. These features minimize the risk of intellectual theft and unauthorized accessing sensitive financial and corporate information that could undermine contracts and cause lawsuits.
A virtual data room is commonly used to share IP documents with external parties, such as potential licensing partners and buyers, during M&A due-diligence. The capacity of virtual data rooms also allows them to share large or confidential documents with internal teams and stakeholders. Moreover, they facilitate collaboration with outside counsel, auditors or consultants.
Utilizing a virtual data space for restructuring or bankruptcy due diligence is an excellent method to speed up the process with outside participants. These transactions require a thorough review of the financial performance of a business, its debt, accounting reports and cash flow statements, budgets for capital expenditures, legal contracts, liens, and credit reports of customers. To ensure the integrity of a transaction and prevent unauthorized access, secure data room security is required.