Virtual data room software is an encrypted repository that allows users to examine confidential information in a safe environment during due diligence and other business transactions. It comes with a superior level of security protocols that common file-sharing platforms lack including specific user permissions that allow encryption both at rest and while in transit, two factor authentication, content watermarking and audit trails that provide logins, uploads and downloads. These features lower the risk of intellectual property theft and unauthorised access to confidential corporate and financial information that could jeopardize contracts or cause lawsuits.
The most frequent use of a virtual data room is to share IP documents during M&A due diligence with external entities like potential buyers or licensing partners. Virtual data rooms are also useful to share large files or documents with internal teams and other stakeholders. Additionally, they allow collaboration with outside counsel, auditors or consultants.
Utilizing a virtual data room for restructuring or bankruptcy due diligence is an excellent method to speed up the process with other participants. These transactions require a review of the financial performance of a business, its debt, accounting reports and budgets for capital expenditures and legal contracts, liens and credit reports for customers. In order to protect the integrity of transactions and to prevent unauthorized access, a robust data room security is essential.
