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A virtual data room (VDR) is an encrypted software platform that enables collaboration and sharing of documents for different business processes. VDRs can be extremely useful for M&A due-diligence as well as financing, legal processes, and any other projects requiring the disclosure of private information to parties outside the corporate firewall.

Certain traditional VDR providers require users to download and run applications on their desktops or other devices to protect themselves. This can slow down the review process and impede access to VDR. It may hinder potential buyers from taking part. Modern VDRs provide a seamless user experience, with native browser support. This makes them more durable as well as flexible and easy to use.

Many VDRs provide a highly organized repository of files. They also offer search tools that can find the presence of text in a wide range of types of documents, including PDFs and Excel documents. This kind of activity tracking is especially important for M&A due diligence and fundraising as it allows administrators to know how much interest the documents have generated with investors or bidders.

Many VDRs also allow users to have permissions on their folders so that only users who have a need to view the document are able to do so. This feature is often utilized by private equity and venture capital companies to share reports with portfolio companies, limited partners and investors to protect confidentiality and speed up the review process. Pharmaceutical and biotech companies use VDRs as well to quickly communicate intellectual property and the results of clinical trials with research partners and regulatory agencies.