Why should you pay for a Virtual Data Room when file sharing platforms as Dropbox or Box.net or Google Docs are free? When it comes to sharing important confidential documents, it’s important to be able to distinguish between these different online services. The short answer is that they were built for different purposes. VDR’s have advanced capabilities tailored for secure transactional work, while consumer type services cater to the common user. If you are managing an enterprise, you would be unlikely to want to leave information on something that is designed for individuals. Here, we examine the factors you should consider when choosing between using Dropbox or a virtual data room:

1) Security

Built with a higher level of security required to run an enterprise, there is good reason why virtual data rooms are used by banks and government agencies. Virtual Datarooms main foundation is security while consumer based services are based on ease of use and mass adoption with security many times as an afterthought.   As a matter of fact, there have been significant high profile security breaches in most of the consumer focused companies. 

Virtual data rooms allow you to remotely control users rights to documents after they have been uploaded; so that if a deal ends or a user is removed from a project, you can lock down access to the document he has saved. In addition to other basic security measures, some data rooms also let users add a personalized watermark to their documents and block the “print screen” key for viewers.

The actions you take in the early stages of a merger or acquisition transaction through a Virtual DataRoom will set the tone for the remainder of the process. This can be daunting, especially if you’re new to the environment, but by planning ahead and giving special attention to certain policies and procedures you can ensure a smooth, streamlined process.

Virtual datarooms replaced physical datarooms years ago, mainly used during the due diligence process.  But it is now that we are really seeing the additional benefits of a dataroom in the early steps of a transaction:

If you’re still using FTP or other consumer storage and transfer solutions for your business requirements, here are 3 reasons to switch to an secure modern solution such as a virtual data room. Remember when you discovered FTP (file transfer protocol) and you thought it was so advanced to be able to upload your data to cyber space? In the good old days before online security became a critical issue, FTP was the answer to transferring information, particularly large files. The problem is, FTP is 40 years old now, and that’s ancient in terms of information technology. 

Your data rooms are all set up and you’re ready to enter the due diligence stage of your merger or acquisition. As was the case in the pre-due diligence phase, the actions depend on whether the process is driven by the buyer or the seller. In the third in our series of posts on the M&A life cycle, we’ll take a look at both options, following on from the planning done at the end of the previous stage.

Physical 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.