Virtual Data Room Blog

Physical Data Room Procedures

06-Mar-2017 09:00:00 / by Kamal Raj

Physical Data RoomPhysical data rooms are quickly being replaced by virtual data rooms, partly because of the complex procedures that are necessary to protect the information held in these rooms. Having confidential deal information in a specific location means that the parties in a deal need to travel to and from the location each time they view documents, which also results in high costs associated with transport, accommodation, premises and security. Another complex issue is the on-site management of the venue, which needs to be restricted to only those who are essential to the due diligence process. Use of Virtual Data Rooms has considerably evolved over the years over its Physical counterpart in many ways.

Let’s take a closer look at the procedures involved in using a physical data room.

Storage of Documents

Storage of physical data requires premises, which could be provided by the law firm overseeing the legal aspects of a merger or acquisition deal. Often, facilities are made available on the premises of the firm located in a specific city or state. 

With regard to the documentation, the following rules apply:

  • All information stored on-site must be sorted, stored in binders and indexed. In the absence of electronic backup, it’s also necessary to keep additional copies off-site in case of disaster.
  • The document index is made available to the various parties who need access before they visit the data room.
  • No information may be removed at any time from a physical data room, other than any documents copied for the viewer by the law firm’s management.
  • Most data rooms allow laptops to be used in the data room, but any electronic devices that have copying abilities are not allowed. This includes copiers, scanners, fax machines and camera-enabled smart phones.
  • Parties viewing information may not mark, change, damage or destroy any of the information in the room, which requires close oversight by way of surveillance video or management presence.
  • When new documents are added to the data room, they must be marked as recent additions and the parties in the deal must be notified that they have been added.
  • If participants need copies, they must complete a request form and file it with the data room’s management. If the documentation is designated as "copyable", the management team will try to accommodate the request within a given timeframe.

Providing Access

Access to a physical data room is far more complex than they are for a virtual model. The process requires specific hours to be set for visitors, and the parties may need individual access times to avoid being in the room together.

Additional access procedures include:

  • Fixed hours. Access to the room might only be available during certain times, due to the oversight and security requirements.
  • Entrance control. Visitors typically give the name of a contact person on their arrival on site, and sign a register before being granted access. In some circumstances, they are photographed for the record and escorted during their time on the premises.
  • The management of the firm providing the venue has the right to withdraw or refuse access to the room at any time and for any reason. If this happens while participants are in the room, they will need to leave immediately.
  • A physical data room usually contains no telephones with external access, to avoid the leaking of information. Participants may also be asked to hand in mobile phones before entering the data room, and they can retrieve them on their departure.

Management of due diligence using a physical venue is far more complex than it is for a virtual data room, and although some deals still require the existence of such a facility, the majority now prefer to use the online option. We also discussed about the differences and benefits of using a VDR over a traditional Physical data room in one of our earlier post which you can check here to understand more. 


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Topics: Data Room, due diligence, virtual data room, VDR