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What Are Data Rooms?

A data room is a secure place for the storage of sensitive documents. Data rooms are used to facilitate a variety transactions, including mergers and purchases, fundraising, first publicly traded offerings (IPOs), and legal procedures. Traditionally, companies would send documents via email or spreadsheets, which is unsafe and inefficient for sensitive data as it is easy to lose track of the versions of documents and who has access to what information. Data rooms provide a central location for sharing documents with multiple parties at once and offer advanced security options like redaction, fence view, and activity monitoring.

The most common use for data rooms is in mergers and acquisitions. During due diligence, buyers will require access to large quantities of confidential documentation. A virtual dataroom enables buyers to review documentation without having to visit the offices of the seller and saves the company money on costs of overhead.

There are numerous virtual data room providers that have different capabilities, prices and features. Choose a service that is compatible with your requirements in terms security and storage capacity.

Once you’ve created your data room, you can upload your information and organize it in a folder arrangement that reflects the transaction. Label your documents and folders clearly so that stakeholders can find what they are looking for. Consider adding metadata to your documents so that they can be searched for and categorized. This will reduce the time spent reviewing documents and increase transparency and accountability in the event that there are any concerns with the content.