A virtual data room (VDR) is a secure, cloud-based system that allows businesses to store and share documents online. Most VDRs have robust encryption technology and access control, delivering an electronic fortress that protects sensitive information from being accessed by anyone else. VDRs can help streamline processes, speed deals and improve communication.

One of the most popular applications for a VDR are mergers and acquisitions. In these cases, parties exchange large amounts of documentation in due diligence prior to concluding a major transaction. VDRs make M&A faster and cheaper by eliminating the need to deliver documents or travel to meetings.

VDRs can also be useful for strategic partnerships, where partners work together to create new products or expand an existing business. It can be challenging for partners to access data without divulging sensitive information or triggering an unintentional violation of compliance.

Security is the main aspect to consider when selecting the right VDR, whether it’s to be used for due diligence, M&A or internal collaboration. Modern VDRs have multi-factor authentication, advanced encryption both in transit and at rest, as in addition to audit logs and other security features to minimize risk. They also have options such as watermarking, disabled print and blind viewing to protect the privacy. This ensures that only authorized users are able to access the document, and also shows a commitment to data integrity. The best VDRs provide analytics on virtual data room user and file activity that administrators can view to verify the accuracy of.