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What Is a Secure Data Room?

A secure data room is a cloud-based solution specifically designed for storing and sharing sensitive business information with controlled access. Virtual data rooms are the latest equivalent of physical rooms in which hard copies of documents were reviewed in the course of negotiations between buyers and sellers. They also come with advanced security features, encryption technology, and other advanced features.

Secure virtual datarooms are built following the same premise as personal file storage and sharing services like Dropbox or Google Drive but with a much higher level of security protection. Data and documents are protected as they are transferred to the cloud, shared in a virtual room and stored on the server. They’re also safer than other file-sharing and storage tools, which rely on plugins or passwords to limit access to certain devices and locations.

In addition, to basic accessibility (on any device and no matter where you are), a data room will typically include collaboration capabilities, e.g. chat and team messaging, to improve the effectiveness of due diligence processes. They also tend to have an audit trail that tracks all the activities of all users, to ensure that any violations can be tracked and traced back to their source.

The majority of data rooms are designed to aid due diligence in an acquisition or merger. Both parties can access the data room to conduct an in-depth analysis. However, they are becoming popular for other kinds of M&A activities, such as divestitures, restructuring, and fundraising. They can also be used as a way to share and examine documents among teams with the added benefit of more robust encryption security compared to traditional email.

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