The Virtual Data Room Boom

In 2015, global companies spent more than $4.2 billion on mergers & acquisitions (M&A), making it the busiest year of M&A activity in history. The rise in M&A is happening alongside significant growth in the amount of the world's data (more than 90% of data was created in just the last two years), increasing the popularity of virtual data rooms (VDRs), online repositories where documents are stored and distributed for review by multiple parties.

Virtual data rooms have become an integral part of M&A transactions, as businesses find that their ever-expanding data needs to be managed and shared in a way that saves time, improves efficiency and enhances security. Since their introduction 10 years ago, virtual data rooms have replaced laborious and paper-heavy due diligence processes, often resulting in increased valuations and shorter deal cycles.

The many benefits of virtual data rooms has led to immense industry growth. From 2009 to 2014, the virtual data room industry grew at an annualized rate of 16.7 percent and it is expected to grow from $628 million in 2012 to $1.2 trillion by 2017, according to IBISWorld. Rob Koplowitz, vice president and principal analyst for Forrester Research, explains the increasing popularity of virtual data rooms saying, "The space around sharing content externally is being pushed by the nature of our work today across organizations, and pushed by the cloud, which is the natural place where content can be shared."

The rising popularity of virtual data rooms has precipitated an increase in virtual data room providers (there are currently 241), which means VDRs aren't hard to find. But the vast array of options can lead to more confusion and uncertainty as to whether you're choosing the right VDR for your business. To ensure you have complete confidence in your business's VDR and fully take advantage of the benefits it provides, Citrix ShareFile has created a virtual data room buying guide which covers all aspects of the VDR buying process.

Here are key takeaways from the guide:

How is a virtual data room different from a physical data room?

The most obvious difference between a virtual data room and a physical data room is the location of the "room" and the format of the documents the room contains. Virtual data rooms exist online, on a website or standalone application. The documents they store are in a digital format, like a PDF or Microsoft Excel file for example. Physical data rooms are tangible rooms that contain documents in paper format, often stored in boxes, binders or file cabinets. Data in a virtual data room is stored on a central server while data in a physical data room is stored in the physical room. In a virtual data room, data can be accessed in parallel by multiple parties, which reduces waiting time while data in a physical data room cannot be viewed by multiple parties at the same time, resulting in a more lengthy review process.

What are the benefits of a virtual data room?

Save time.
  • Virtual data rooms can be set up for access typically within just a few days.
  • They can be accessed by multiple potential bidders at the same time, 24 hours a day, 7 days a week.
Save money.
  • While the initial costs of setting up a virtual data room may seem high, it is generally more cost effective in the long-run as compared to a physical data room.
  • Virtual data rooms do not require hours of lawyers time to copy and collate hard copies of documents.
  • Virtual data rooms allow multiple parties to access the information from their computers anywhere in the world, saving on travel costs required to visit a data room in a physical location.
Increase efficiency.
  • Virtual data rooms allow for a more real-time, interactive due diligence process, preventing potential bidders from having to return to a physical data room multiple times when they have questions or need to further review documents.
  • Virtual data rooms can be setup to send email alerts when new documents are uploaded, immediately informing potential bidders of new material for review.
  • Virtual data rooms make it easier to ensure that documents are not overlooked as they clearly indicate when documents have not been viewed.
Improve understanding of deal progress.
  • The activity log in a virtual data room indicates which documents have been reviewed, who they were reviewed by, and the length of time in which they were reviewed.
  • This data can glean insight into the interest level from potential bidders and can highlight any concerns and points of negotiation that could arise.

Is your business ready to take advantage of the benefits of a virtual data room? ShareFile offers a free trial for 14 days under no obligation. Learn more about it, and sign up today.