Why and How to Use Virtual Data Room for Private Equity Firms (2022)

Private equity firms frequently opt for virtual data room (VDR) solutions when conducting investment deals. VDR vendors aim to ease the deal-making process and accelerate transactions.

This article covers the main benefits of using virtual data rooms in private equity global business. It outlines the main VDR features required for successful private equity deals and gives recommendations on how to set up an effective private equity data room.

What is a private equity data room?

A private equity data room is basically virtual data room software for private equity deals.

With its help, portfolio companies gather all important information and documents required for the due diligence process, store them online in a secure environment, and collaborate with parties involved in the deal.

There are many virtual data room providers for private equity deals that offer different information exchange services and document security features.

The best data room providers for private equity deals are gathered on the main page of our website.

(Video) Caplinked Virtual Data Room - Full Demo

Top use cases of private equity data rooms

Virtual data rooms can come in handy at every stage of the private equity deals. Below are the main use cases:

  • Loan syndication
  • Sourcing deals
  • Private placements
  • Debt and equity fundraising
  • Sell-side M&A
  • Buy-side M&A

Advantages of using a virtual data room for private equity deals

A virtual data room platform for private equity deals assembles all industry insights to grant its clients a first-rate experience. Modern virtual data room providers offer various features aimed at facilitating the deal process for speeding up a transaction.

Below are the main benefits you can expect when choosing a virtual data room for conducting due diligence.

Enhanced security

Security standards of a virtual data room should always be high.

By opting for a virtual data room solution for your business deal, you ensure that your investment strategy and the documentation you share with private equity firms during due diligence stay protected, and only authorized users can reach it.

Additionally, virtual data room administrators get full control over user activity and can decide on their access permissions. This way, you protect highly confidential and essential documentation from unwanted eyes and external parties.

Streamlined collaboration

The majority of virtual data room vendors provide dedicated collaboration tools so that prospective investors and target company’s representatives can communicate at every stage of the deal.

(Video) FirmRoom Explainer on Virtual Data Rooms

This significantly facilitates decision making, as questions that arise can be answered promptly.

Files storage and sharing

Any private equity firm will need to review a lot of documentation before considering whether to continue funding. Additionally, virtual data room solutions allow storing large volumes of information in one secure place.

It’s easy to upload all files with a few clicks. Due to artificial intelligence technology, they are all automatically organized and structured thanks to such services as automatic index numbering.

Round-the-clock availability

Since all documentation prepared for the fund is stored in the cloud, private equity firms and other partners can access files anytime and from anywhere.

This greatly simplifies the workflow as well as accelerates the deal.

What features should a virtual data room have for efficient private equity deals?

Although the majority of virtual data rooms provide similar file storing and organizational services, choosing a vendor for conducting private equity due diligence, you should opt for software with the following features.

Document management features

Modern virtual data rooms offer a variety of tools that help you manage large volumes of information easily, which saves a significant amount of time. And an ability to rapidly conduct analysis in the private equity global business is important.

(Video) Raise Private Equity & Execute Due Diligence With Virtual Data Rooms | Ansarada

These are several document management features that will help you facilitate deals:

  • Drag-n-drop file upload — allows for the lightning-fast upload of hundreds of files in a few clicks.
  • Full-text search — helps private equity firms’ representatives, investors, or team members to find a particular piece of information or document in seconds.
  • Files labeling — enables virtual data room administrators to label certain categories of documents so that prospective investors can review them in the first place.

Document security features

This is what differentiates virtual data rooms from common cloud storage and ensures top-rated security for private equity documentation.

Every virtual data room provider offers a unique set of document security features. However, below are a few that will keep sensitive information during private equity deals protected:

  • Dynamic watermarking — restricts your documents from being illegally distributed when printed or downloaded, as embedded watermarks with your company’s name appear on top of each document.
  • Redaction — enables you to censor a particular area of a document or image so that personally identifiable information stays private. It’s especially relevant to HR documentation that private equity firms often require to review.
  • Granular document permissions — helps to decide on what actions can be performed on a particular document. For example, if the intellectual property documentation is only allowed to be viewed, no one can download or print it.

Access security features

These tools also aim to keep documents safe during a private equity deal. An administrator of the virtual data room can set up concrete user permissions and restrictions and get detailed reporting on users’ activity.

Below are a few access security features that might be helpful during private equity funding:

  • Granular user permissions — allow setting certain document access permissions for every virtual data room user. For example, if your company has a few potential investors that require reviewing different documents, you can just customize their access permissions to all the documents uploaded instead of creating a separate virtual data room.
  • Access control and expiration — helps to control timely document reviewing and, thus, to facilitate the private equity firms’ decision-making.
  • Two-factor authentication — requires virtual data room users to confirm their identity by entering a code they receive through SMS when they access private equity documentation. This way, you reduce the risks of any third party viewing your corporate documentation.

Collaboration tools

The success of any private equity deal greatly depends on the quality and efficiency of the interactions between the parties.

(Video) Lesson 3 - Due Diligence | Chapter 4 - Data Room Preparation

A virtual data room helps target companies and potential private equity investors to resolve issues swiftly with the help of such features as:

  • Q&A module — prospective investors can leave questions regarding a specific document and the target company’s representatives will answer them in a timely manner.
  • Prompt notifications — virtual data room administrators receive user-activity notifications. For example, when a private equity firm is finished reviewing tax documents, the company’s representatives will be notified and can react proactively.
  • In-built chat — some virtual data room providers offer this tool so that the parties involved in a deal can discuss matters in real time.

What to include in a private equity virtual data room?

The range of documents to upload to a private equity virtual data room will differ depending on your company’s initial goals. However, there are several common recommendations.

General company information

  • Amended and restated articles of incorporation
  • Past board meeting information and minutes
  • Market analysis and operational plans
  • Transfer restriction and registration agreements

Intellectual property

  • Copyright materials
  • Trademarks
  • IP strategy
  • Granted and filled patents

Tax documents

  • Information on charges (if any)
  • Company’s filings for the last two years
  • Filling history

Financial documents

  • Balance sheets
  • Profit and loss statements
  • Pro forma statements for the upcoming year
  • Projections

Tips for setting up the data room for private equity deals

To impress potential investors and present your company as a worthy private equity investment opportunity, follow these simple recommendations.

Create a clear and logical structure

The easier it is to navigate large volumes of data and documents, the faster the due diligence process will be.

For this, create folders and subfolders and structure them logically. Private equity firms will appreciate reviewing well-prepared documentation where it’s clear what documents a particular folder contains.

Use a clear document naming system

It has to be clear from the file’s title what information is stored there. For example, when presenting a company’s balance sheet, indicate the timeframe.

Update documentation regularly

Private equity investments might take time, and, naturally, there might be some changes in the company’s structure or financial system. That’s why it’s crucial to indicate those changes in the documentation uploaded to the virtual data room so that prospective investors get the most accurate information.

(Video) VIRTUAL DATA ROOM - What is this ???

Sometimes, having separate virtual data rooms for different private equity needs is beneficial.

Takeaways

A private equity data room is virtual data room software aimed to facilitate due diligence and speed up the deal-making process.

Virtual data rooms for conducting private equity research come with many advantages and offer a number of features that simplify the process. Such platforms help to keep sensitive corporate information secure, manage large volumes of data, and collaborate with private equity firms.

FAQs

What is the purpose of a virtual data room? ›

A virtual data room (VDR), also known as a deal room, is a secure online repository for document storage and distribution. It is typically utilized during the due diligence process preceding a merger or acquisition to review, share, and disclose company documentation.

How do virtual data rooms work? ›

A virtual data room is a secure online environment where large volumes of confidential data can be shared securely beyond the walls of an organization. A VDR differs from a company extranet in that is designed to securely share sensitive documents outside the corporate firewall.

What is a private virtual room? ›

As the name suggests, a virtual data room, or a “VDR,” is an online database in which companies can store and share confidential information, usually used during a financial transaction.

What is a virtual data room provider? ›

Virtual data room providers facilitate secure document exchange between parties by granting each entity access to an online deal room. A virtual data room is an alternative to paper-based data rooms, which require parties to be physically present.

What is a data room for investors? ›

An investor data room

data room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
is a storage space, digital or physical, where companies store information relevant to due diligence. It can also hold other valuable data. For example, when an enterprise wants to buy a company, this information helps investors ensure everything is in order.

Can Dropbox be used as a data room? ›

Where VDRs provide this security on a project-to-project basis, Dropbox keeps everything in one main folder, giving the user a sea of all their data in one place. By using proper virtual data rooms

data rooms
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
, companies can create separate rooms for separate deals, for instance. Dropbox does not allow that.

What is a data room private equity? ›

What Is a Private Equity Data Room

Data Room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
? A private equity virtual data room is an online document storage provider that contains essential documents relating to a company or deal. In terms of how data rooms benefit private equity deals, they can be essential as to whether or not the M&A deal goes through.

How do I create a virtual data room? ›

6 Tips for Setting Up a Virtual Data Room
  1. Select the best VDR solution. ...
  2. Decide which documents to place in the VDR. ...
  3. Organize files and folders. ...
  4. Establish user roles and access. ...
  5. Establish NDAs. ...
  6. Confirm software settings.
18 Aug 2020

Can SharePoint be used as a data room? ›

Microsoft SharePoint as a VDR

Businesses use the SharePoint environment as a virtual data room to make available documents to external users and outside organizations (such as partners, vendors, clients, or customers). A document library can be created with the necessary folders for each outside organization.

Where can I host a data room? ›

Top 10 Virtual Data Room Software
  • iDeals.
  • DocSend.
  • RMail.
  • SecureDocs Virtual Data Room, an Onit Product.
  • ShareVault.
  • Firmex Virtual Data Room.
  • Ansarada.
  • ShareFile Virtual Data Room.
7 Sept 2022

What is a data room due diligence? ›

An electronic due diligence data room, often referred to as a virtual data room, is essentially online cloud storage. They house a safe place for important data, such as documents and files, to be uploaded, shared, and stored. Data rooms used to be physical rooms where paper files were stored.

What is a data room index? ›

A data room index is an index of documents or data room table of contents. It lists all of the documents inside the VDR made available by the parties involved. Much like an index inside a book, this virtual data room index is used to locate information and can be an incredibly useful tool. May 11, 2022.

Are data rooms expensive? ›

Typically, data rooms will charge between $100 and $250 per administrative user. Before choosing a data room provider, it is important to check how many users the room will allow without charging extra.

Who are intralinks competitors? ›

Competitors and Alternatives to Intralinks VIA
  • Google Drive.
  • OneDrive for Business.
  • Dropbox Business.
  • Box.
  • Citrix Content Collaboration.
  • Egnyte Platform.
  • Zoho WorkDrive.
  • AMPLIFY Content Services.

How much does Datasite cost? ›

Comparison of Top Online Data Room Services
Virtual data roomBest ForPrice
iDealsSmall to large projectsGet a Quote
IntralinksMedium and large businesses.Starts at $25 per month
Merrill DatasiteMedium and large businesses.Get a quote.
BrainLoopSmall, Medium, and Large businesses.Get a quote.
1 more row
24 Sept 2022

What should a data room look like? ›

Company organization documents, pitch decks, financial information, people-related documents, market information are some of the sections that are often included in a data room. Founders should be wary of including proprietary information such as code, trade secrets, etc in the data room.

What does a data room contain? ›

A data room

data room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
is a space used for storing information such as contracts or corporate documents typically with the intent to share that information in a secure and/or confidential fashion with others (such as with a potential acquiror). A data room can be physical or virtual.

What's in a data room? ›

What is a Data Room

Data Room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
? A data room is a secure place that is used to store privileged data, usually for legal proceedings or mergers and acquisitions transactions. Data rooms are used for storing documents, file sharing, securing sensitive documents, and conducting financial transactions.

How do I create a data room in Dropbox? ›

How to Create Secure Auditable Data Rooms on Dropbox or Google Drive

How do I create a data room in Google Drive? ›

Create Secure Data Rooms from Google Drive - YouTube

How do I create a data room in Docsend? ›

Getting started with DocSend virtual data rooms - YouTube

How do you create a data room in a team? ›

Creating Virtual Data Rooms Within Your Microsoft 365 Tenant Using ...

How do I make an Ansarada data room? ›

Setting Up a Virtual Data Room
  1. How to Set Up a Virtual Data Room. Setting up a virtual data room needs to be fast, easy and uncomplicated. ...
  2. One: choose a virtual data room. ...
  3. Two: invite users. ...
  4. Three: add files and folders. ...
  5. Four: set security. ...
  6. Expert support on tap during your data room set up.

What is a deal room? ›

A DealRoom brings B2B buyers and sellers together in a single digital sales room and incorporates all the necessary technology, documents, and data needed to close deals.

Is Box A VDR? ›

Management accepting these challenges because BOX

BOX
Our Box for Google Workspace integration enables your people to create and collaborate on Google Docs, Sheets, and Slides without leaving Box. Since your Google files are automatically saved and managed in Box, you reduce manual processes and get work done faster.
https://www.box.com › en-gb › partners › google
is basically a free VDR platform since we are using it within our organization already.

How do I create an external sharepoint site? ›

External sharing of a Team Site connected to a Microsoft 365 Group
  1. Gear Icon > Site Permissions.
  2. Invite people > Share site only.
  3. Type the email address of an external user, set proper permission level, click Add.
20 Oct 2020

Does Carta have a data room? ›

Data room

Data room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
s help you organize all of the necessary documents that need to be shared with investors and counsel during the due diligence phase of a transaction. Navigate to Company > Data rooms. Click Create data room.

How do I organize my due diligence data room? ›

How to Organize Your Virtual Data Room for Due Diligence
  1. Use a Specific Document Naming System. ...
  2. Create Folders and Subfolders. ...
  3. Keep Things Updated in Real Time. ...
  4. Conduct Searches to Confirm Organization.

What should be included in a due diligence data room? ›

Due Diligence Data Room Checklist
  1. Articles of incorporation and legal documents.
  2. Records of ownership – often in the form of a Cap Table.
  3. Shareholder certificates.
  4. Previous funding round records and liquidity events.
  5. A comprehensive record of company financials and future projections.
7 Jul 2021

What are larger data rooms known as? ›

Some firms opt to bid on and secure deals using data centers. Data centers are large rooms that house computer systems, telecommunications and data storage. Corporations use data rooms

data rooms
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
to store large amounts of data.

How do I create a data index Room? ›

Tips for organizing a proper data room index
  1. Create a few top-level folders. This creates an overbearing structure.
  2. Make sure your sub-folders are detailed, and you know what is inside of them. The structure needs to be filled with readable folders.
  3. Naming should support your system, not make it more difficult.

What is due diligence checklist? ›

A due diligence checklist is an organized way to analyze a company that you are acquiring through sale, merger, or another method. By following this checklist, you can learn about a company's assets, liabilities, contracts, benefits, and potential problems.

What is a due diligence folder? ›

A due diligence folder is a digital folder containing a series of detailed documents relating to a company. The data contained in this folder typically builds on analysis or information presented in an investment document and provides validation to many of the market claims or growth prospects presented to investors.

What is a data room due diligence? ›

An electronic due diligence data room, often referred to as a virtual data room, is essentially online cloud storage. They house a safe place for important data, such as documents and files, to be uploaded, shared, and stored. Data rooms used to be physical rooms where paper files were stored.

Is SharePoint a data room? ›

Microsoft SharePoint as a VDR

Businesses use the SharePoint environment as a virtual data room

data room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
to make available documents to external users and outside organizations (such as partners, vendors, clients, or customers). A document library can be created with the necessary folders for each outside organization.

What are large data rooms also known as? ›

A data room is also commonly known as a deal room

deal room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
. Data rooms have several purposes, but they all share a few things in common. They need to be able to accommodate large numbers of documents and they need to be accessible to various parties involved in a transaction or collaboration.

What is a deal room? ›

A DealRoom brings B2B buyers and sellers together in a single digital sales room and incorporates all the necessary technology, documents, and data needed to close deals.

What is a data room private equity? ›

What Is a Private Equity Data Room

Data Room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
? A private equity virtual data room is an online document storage provider that contains essential documents relating to a company or deal. In terms of how data rooms benefit private equity deals, they can be essential as to whether or not the M&A deal goes through.

How do you set up a data room? ›

  1. Step 1: Find a Data Room Provider. There are many data room providers out there. ...
  2. Step 2: Determine Data Room Structure. Having a cohesive data room folder structure can make the process of conducing due diligence much easier. ...
  3. Step 3: Upload and Organize Files. ...
  4. Step 4: Grant and Monitor Access.

How do I organize my due diligence data room? ›

How to Organize Your Virtual Data Room for Due Diligence
  1. Use a Specific Document Naming System. ...
  2. Create Folders and Subfolders. ...
  3. Keep Things Updated in Real Time. ...
  4. Conduct Searches to Confirm Organization.

How do you create a data room in a team? ›

Creating Virtual Data Rooms Within Your Microsoft 365 Tenant Using ...

What is a data room investment banking? ›

A data room is a secure place that is used to store privileged data, usually for legal proceedings or mergers and acquisitions transactions. Data rooms

Data rooms
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
are used for storing documents, file sharing, securing sensitive documents, and conducting financial transactions.

How do I create a data room in Google Drive? ›

Create Secure Data Rooms from Google Drive - YouTube

How much does it cost to set up a data room? ›

Virtual Data Room

Data Room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
Pricing Explained

Most VDR vendors still rely on per-page pricing, a pricing structure held over from the day when providers must be onsite to make copies of physical documents. Depending on transaction value and size, per-page pricing can cost anywhere between $20,000 to $40,000.

What is meant by a data room? ›

A data room

data room
A virtual data room (sometimes called a VDR or Deal Room) is an online repository of information that is used for the storing and distribution of documents.
https://en.wikipedia.org › wiki › Virtual_data_room
is a space used for storing information such as contracts or corporate documents typically with the intent to share that information in a secure and/or confidential fashion with others (such as with a potential acquiror). A data room can be physical or virtual.

What is a data room law? ›

As part of the due diligence and disclosure process in a share or asset sale, an online or physical space that is set up by the seller for the purpose of collating and making available for review by a prospective buyer, certain legal, commercial and financial information relating to the target company or business.

What is a data room index? ›

A data room index is an index of documents or data room table of contents. It lists all of the documents inside the VDR made available by the parties involved. Much like an index inside a book, this virtual data room index is used to locate information and can be an incredibly useful tool. May 11, 2022.

How much does Datasite cost? ›

Comparison of Top Online Data Room Services
Virtual data roomBest ForPrice
iDealsSmall to large projectsGet a Quote
IntralinksMedium and large businesses.Starts at $25 per month
Merrill DatasiteMedium and large businesses.Get a quote.
BrainLoopSmall, Medium, and Large businesses.Get a quote.
1 more row
24 Sept 2022

What does source scrub do? ›

SourceScrub is the world's leading data service

service
servizio m (plural servizi) (sports) service, serve. facility, feature, utility, setting. (plural) bathroom.
https://en.wiktionary.org › wiki › servizio
for firms looking to research, find and connect with privately held companies. Our Private Company Intelligence platform allows deal teams to take a data-driven approach in a traditionally opaque segment of the market.

Videos

1. What is VIRTUAL DATA ROOM? What does VIRTUAL DATA ROOM mean? VIRTUAL DATA ROOM meaning & explanation
(The Audiopedia)
2. The Detail Group M&A - Increase Business Readiness With Virtual Data Rooms | Ansarada
(Ansarada)
3. External Data Conference | How Venture Capital and Private Equity Firms Use External Data | NY, 2019
(External Data Conference)
4. Data room private equity
(Videos Viral)
5. The Most Important Features You Need in a Data Room
(DealRoom)
6. Caplinked Virtual Data Rooms - Overview
(Caplinked Virtual Data Rooms)

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