Typically it is a virtual data space that provides an easy access to sensitive documents through a web site or secure agent software. It is commonly used for M&A transactions and asset management. Due diligence, IPOs, and joint venture investments are also common uses.
Life science firms such as those, for example, need to provide investors with information about everything from HIPAA compliance and clinical trial results to licensing intellectual properties and keeping patient records. This type of sharing requires transparency, and the VDR makes sure that each document is accessible to the right people. It also tracks the time when the document has been viewed or changed.
In the legal world documents can impede communication between clients and lawyers. Many law firms make use of virtual data rooms to organize and track important documents.
VDRs are used in other industries for the same reasons, whether they’re conducting research and development, or working with contractors during the construction of a structure or delivery of the product. All of these scenarios require the transfer and storage of huge amounts of data. A properly designed dataroom will have all of the tools needed to complete this task seamlessly and safely. That includes built-in versioning and audit trails, which can provide evidence of what changes to a document were made and the person who made them. This can be extremely helpful when you need to prove who made certain edits or remarks, which is often the case in professional settings.