The term data room has its origin in the area of due diligence audits. In the past, a protected physical room, a so-called data room, was set up as part of a sales process during due diligence. Only the bidders involved in the due diligence and external consultants have access to this data room in order to view and examine the confidential documents collected there.
In the course of globalisation and the increasing use of IT-supported document management systems, the physical data rooms have been replaced by virtual data rooms over time in order to save travel time and to facilitate the work of those involved in due diligence.
A virtual data room is an Internet-based application that provides secure, location-independent access to confidential documents. In the virtual data room, all documents relevant for due diligence can be stored in a structured manner and made accessible to specific user groups (e.g. bidders) for read access and/or download via access rights. The virtual data room offers the highest possible protection during data exchange of confidential data through data encryption during transmission and storage. In addition, particularly sensitive documents can be protected against downloading and with a watermark. Detailed access rights in the data room control which users can only read, download or edit data. And administrators of a virtual data room have full control over all processes in the data room at all times via activity logs.
Today, virtual data rooms are of great interest to companies beyond the subject of due diligence and are also used outside of mergers & aquisitions, company takeovers and real estate transactions for secure, cross-location and cross-company data exchange and online collaboration. Whether with customers, business partners or in project teams. Previous solutions such as e-mail, FTP servers or complex software applications such as SharePoint or cloud storage services are either too insecure or overburden users and require considerable IT administration effort. At the same time, companies are facing increasing compliance requirements with regard to data privacy and data security - even when exchanging data across company boundaries. A virtual data room offers the highest level of data exchange security through encryption of data during transmission and storage, user-specific access rights, extended document protection, such as watermarks, and seamless logging of all activities in the data room.
In the following, the typical use cases of virtual data rooms are listed: