It doesn’t come as a surprise that the virtual data room industry is already a billion-dollar business sector, which is expected to grow to $3.6 billion dollars by 2026. The success of virtual data rooms can be seen from their implementation in multiple business sectors across the globe.
What triggered such a remarkable growth of online data room software technology? The expansion of data rooms is not overnight. It was the financial sector that started using data room software for M&As about two decades ago. Later, the use of virtual data rooms expanded to the law industry, health sciences, education, oil and energy, real estate, etc.
Here is a detailed overview of common electronic data room use cases.
How do businesses use virtual data rooms?
1. Board communications and data management
Managers, CEOs, CFOs, investors, partners, and corporate directors are among the primary users of VDRs. Online data rooms are digital document repositories for secure data management. That said, boards can use online data room software as their central meeting point where they can store, share, edit, change, or distribute board material like board books, meeting minute archives, meeting agendas, and other important data.
Second, virtual data rooms are also fully equipped with business communication tools. These tools help boards in meeting management. They can create meeting agendas, share board books, arrange HD audio and video conferencing, take notes, cast votes, and prepare/distribute meeting minutes. The electronic signature feature makes it possible to sign documents electronically.
- Tip. The virtual data room industry is a saturated market. To make their choice of a digital solution easier, managers choose the best data rooms here.
2. Corporate documentation and virtual collaboration
Data room services are no less than heaven for remote workers and companies with a hybrid work culture. Data room software acted as a safe haven for businesses during Covid-19 lockdowns. That’s because a virtual data room has everything a business needs to work without a physical space.
Businesses can use virtual data rooms as:
- Corporate databases where they can keep any or all types of business documents.
- A data-sharing platform for internal and external purposes
- Virtual collaboration or meeting management platform
- Deal management platform or a collaboration space to communicate with investors or stakeholders
Tip. Read more about data room’s role in virtual collaboration on https://www.idealsvdr.com/blog/methods-of-financing-mergers-and-acquisitions/. This website contains the description of data rooms’ benefits for specific use cases as well as independent data room comparison results based on the opinions of thousands of customers.
3. Litigation
Lawyers, attorneys, and law firms stand among the top 5 biggest consumers of virtual data room technology. That is why virtual data room providers have developed customized solutions for the law industry.
Electronic data room software serves the law industry in multiple ways. For instance, corporate lawyers use it for regular communication and data sharing with their clients. Lawyers also use data rooms for legal due diligence.
In addition to that, many law firms use online data rooms as their primary document repositories. It allows lawyers to access case-relevant data from anywhere, anytime. VDRs become more useful when multiple lawyers are working on one case.
During litigation, digital data rooms act as a central platform for sensitive data sharing and communication. That’s because VDRs give full control when sharing confidential data with external parties.
Tip. Some of the best data room providers offer comprehensive digital libraries of legal forms. Such solutions are especially useful for litigation.
4. Life sciences
VDRs are very common in different fields of life sciences. Hospitals, pharmaceutical and biotech companies, medical devices manufacturers, and R&D firms use VDRs in various ways.
R&D firms often use data rooms to protect their research work from being stolen. Also, fundraising has become safer and faster with the help of virtual data rooms.
Hospitals use this technology to store records of hundreds and thousands of patients. Many countries or states require healthcare institutions to keep patient data for at least 10 years; VDRs make it happen with ease and safety.
Virtual data rooms help biotech companies in managing their IPOs. They can use VDRs for due diligence during initial public offerings as VDRs protect data from unauthorized downloads, screenshots, or even photographs. In addition to that, processes like partnerships, licensing, and clinical trials.
Tip. Other common VDR use cases include real estate management, IPOs, capital raising, etc.
5. Mergers and Acquisitions (M&As)
The biggest and the oldest use case of virtual data rooms, M&As in modern-day seem incomplete without VDRs. The corporate sector in North America mostly uses this technology for mergers, acquisitions, fundraising or capital raising, joint ventures, strategic partnerships, and asset sale/purchase.
Here is how data room software assists in M&As:
- Sharing and analyzing pre-due diligence documents
- Contacting multiple sellers/buyers at the same time
- Conducting financial, HR, IT, and legal due diligence
- Ensuring smooth, safe, and real-time data sharing, communication, and negotiations between all parties involved.
- Signing contracts or purchase agreements
- Simplifying post-merger/acquisition integration
Tip. Some of the best virtual data room providers for M&As include Dealroom, IntraLinks, Merrill, FirmRoom, and iDeals.
Final words
Virtual data room technology has penetrated every business industry. VDRs are an integral component of M&A deals, fundraising, IPOs, licensing, joint ventures, strategic partnerships, real estate trades, and due diligence. Best of all, data rooms are similarly suitable for different uses — from board communications to virtual collaboration and secure data management.
