Virtual data rooms have become increasingly popular due to their simplicity and superiority over the physical data rooms of the past. Virtual data room providers offer a platform on which information and documents can be shared securely and managed by the vendor. Online virtual data room providers have flooded the market in recent years making the search for the best virtual data room for your company increasingly harder and more complicated. Virtual data room software providers differ in their approach to security, access control, compatibility and support among others, so knowing how to contrast and compare virtual data room providers is key to finding a provider that meets your needs.
Virtual Data Room Comparison
Most virtual data rooms will provide similar services that meet the needs of companies looking to use them to facilitate the due diligence process of mergers and acquisitions, loan syndications and private and venture capital transactions. The primary aim of an online data room is to provide the platform for the information sharing to take place, while also providing strict controls over how the information can be accessed and shared. When comparing and choosing data rooms, you must first check that the virtual data room provider offers the standard services to meet the requirements of your deal or transaction.
Broadly, you should look at the ten areas that all virtual data room (VDR) providers cover, and the extent to which the features of each section meet the needs of your business.
- Document Management
Document management refers to how the online data room accepts, handles, stores and sorts the documents that are of importance in the transaction. Typically, data rooms will try and make the process of uploading vast amounts of documents an easy and simple process to facilitate the timeliness of the transaction. Drag and drop uploading, bulk uploading and non-specific format uploading should be offered as standard.
The storage of the documents in the data room needs to be simple and well indexed or categorised. Look for providers that offer page indexing and files and folders compatibility. User interface is an important distinguishing factor between data room software.
- Document security
The security of a virtual data room is often the most scrutinized feature – and rightly so. Sensitive company information is often involved, so a VDR that encrypts and strictly controls access to all documents is ideal. Most providers will offer different levels of viewing rights, with some even offering watermarks, virus scanning and specially integrated document viewers.
Security and compliance often go hand-in-hand, so comparing these two sections together is recommended. You want to look for software that doesn’t trade off usability with security and complies with both national and international regulation.
- Ease of use
Ease of use refers to the compatibility of the VDR software across several platforms including mobile devices. Top end VDRs will offer multi language platforms and single, secure sign-on services and this will be reflected in the virtual data room pricing by those providers.
- Access security
Access security is the ability of the VDR software to limit and restrict access to users based on the rights they have been granted by you, the company. These can include IP address restrictions, time based restrictions and even two-factor authentication. This area is where most providers differ as it is probably the most complicated yet important feature of a VDR alongside document security. Controlling access, restricting printing or the duplication of documents requires many proprietary features that differ significantly among software providers.
- User management
This is the ability to manage and monitor all those who have been granted access to the documents. This is usually only a feature of high-end data rooms, which will fall towards the top of the virtual data room pricing spectrum.
This refers to the extent that the software can perform internal audits to track which files have been seen and by who. The tracking of user activity is often required for compliance reasons when sharing sensitive company information.
Q&A capability allows viewers of the documents to interact and ask questions based on the information they have access to. This allows discussion to take place, all of which can be monitored and controlled centrally.
- Speed and Availability
These are indications of the reliability and performance of the data room at sharing and sending large documents. You want to look for a VDR that has high network speeds and minimal downtime.
This allows businesses to adapt the interface to suit their own branding as well as to set restrictions on language and location.
This is the extent to which the VDR data room abided by certain regulations and certifications designed to protect sensitive information and security.
Data Room Services: how to choose?
The best virtual data rooms need little more than high security document storage, a slick user interface and an array of useful features to attract businesses. Finding which online data room providers offer genuine quality services and are not just pushing their marketing agenda onto you is a process made undeservedly complication by the fancy words and gimmicky features used in most marketing jargon.
To make the process easier for you, we have broken down the process into two simple parts; important features and unimportant features. Important features being those that you should consider and enquire about before committing to a virtual data room software provider and unimportant being those features that you should skim past and not give too much weighting.
A good approach to choosing a data room service is to imagine the data room as a pyramid with the important features at the base and the unimportant ones at the top. When searching for the providers, start by comparing the base and work your way to the top. This will ensure that you are paired with a provider that pays attention to the foundations of a good data room before working on the finishes and extras.
It should go without saying that security is the backbone of any data room and so should be the first thing you look at when considering different providers of data room software. A good starting point would be to check that the software is compliant with all security regulations as this is often a legal obligation.
From there you should look at how and where they store data. Check for data encryption, online and offline protection and the various method they use for preventing the data from being replicated by those given access to it. This can include watermarking documents and using special document presenters that don’t allow printing.
To look deeper into the data handling of the provider, it is a good idea to ask if the provider uses in-house data storage or if they outsource the storage to various data centres. In-house management and storage is preferred as it adds to the security of your documents.
The user interface of the software is a fairly subjective point to compare so the job has to be done through trying or testing out the software yourself and getting a feel for the usability and simplicity of the software. This largely ties in with the pricing section that deals with free trials.
PRICING AND CONTRACT TERMS
The price you pay is of course a factor and so should be considered alongside the other important features. Don’t get too caught up in small differences in pricing because the value that a good data room can have to your business is many times the cost of the software.
One thing to look for is the offer of a free trial or paid trial that lasts for a limited amount of time, allowing you to test the software before committing to a 12 or 18-month contract.
RELIABILITY AND EXPERIENCE
Once again, it is hard to test the reliability of software without actually using it yourself, but a good way of testing would be to look at reviews by other customers and through looking at the experience of the provider.
Look for virtual data room providers that have dealt with a variety of transaction types and that have experience working on extensive transactions such as IPOs and large mergers or acquisitions.
- Non-vital features
Many of features listed earlier in the article are not vital features a data room must have. These include customization options, Q&A ability and internal audit reports. While these are all genuine features that perform genuine functions, they are extras that you should look at only if your business would need them.
The best data rooms will tend to include most of these non-vital features, so don’t be put off if you see them – just don’t get caught up on them instead of focussing on security.
A good way to avoid unnecessary features is to write up a list of all the functions and features you need from your data room provider and then keep that list with you as you compare providers. This will keep you focussed on looking for the software that meets your business needs.
Overview of Top Data Room Providers
iDeals Virtual Data Room
iDeals VDR is widely considered to be the market leader in virtual data rooms because of their use among the largest and most prominent companies. Clients include Toyota, LG, Deloitte, KPMG, Citi, BDO and UBS among others and they have facilitated the sale of over $100bn in capital through mergers and acquisitions.
They pride themselves in ease of use and offer round the clock support 24/7/365. They have multiple datacentres worldwide and offer the widest range of security and user access tools on the market. They are compatible with most operating systems including cross browser support and even support for Android devices.
Another big player in the market is Intralinks and their Dealspace software is targeted at companies looking to streamline the Mergers & Acquisitions process, both in terms of cost and time. Their selling point is acceleration of the due diligence process that has the testimony of their 3.1 million registered users and 6,000 annual transactions.
They offer time improvement for both buy-side and sell-side deals through their popular software that covers many platforms and is packed full of features. They are a well-established brand in the VDR space and fulfil almost all customer requirements.
With the backing of many large companies and experience of multiple deals, Merrill fills up the top 3 VDRs with its Merrill Datasite virtual data room. Boasting all round support for 14 different languages and completing 6,000 transactions annually, Merrill Datasite is another heavyweight in the industry with their streamlined platform.
They say their Datasite can be used for numerous business transactions ranging from Mergers and Acquisitions to IP management to capital transactions. They claim their software can be up and running for your business in as little as two hours and offers cost-cutting and time-saving throughout the lifecycle of the deal.
Brainloop Secure Dataroom
Outside of the big three comes the Secure Dataroom platform from Brainloop, which has established a very strong presence among Germany’s largest companies. Compared with the top 3, Brainloop Secure Dataroom offers the same level of high security, but with a slightly less integrated user interface and less intuitive design.
If you’re looking for a VDR that gets the job done and that doesn’t come with all the bells and whistles of the upper-end platforms then Brainloop offers a good product to fill that space. You won’t have as much user management options but will still be able to centrally control access of your documents.
Watchdox by Blackberry
Recently acquired by smartphone maker Blackberry, Watchdox is available in two sizes for businesses and enterprises and allows secure file sharing to take place across multiple platforms. All standard security features have been incorporated into their data room software, which is integrated with other Windows file sharing systems such as SharePoint.
As one would expect from a phone maker, the software is fully mobile compatible and is very intuitive to use. Flexible deployment options allow for the software to be fully cloud-based, on-premises or a combination of both depending on the needs of the business.
Box Virtual Dataroom
Box VDR is a very easy to use data room built for small to medium sized companies looking to fully integrate their enterprise resource management and deal making capabilities into one platform. The platform aims to save money by streamlining the due diligence process for your business to help you make smart choices and close deals.
The VDR is fully customizable, allowing you to brand the interface with your own logos so that potential buyers or sellers are presented with an experience they can trust. The platform allows for easy communication and has stringent security measures that allows you to specify user access to documents.
Who uses Virtual Data Rooms?
Virtual data rooms are almost exactly what the name suggests; online versions of the traditional data rooms used for centuries by businesses and companies completing transactions. The need for an online data room arises whenever there is a need for secure documents to be shared in a controlled and centrally managed environment, not an easy task on the internet. Public data sharing applications typically allow you to control who you share the document with but not how they use it and who else they can share it with. If you share a document with someone using Drop Box or Google Drive, there is no stopping them from sharing that same document with whoever they want.
This is where virtual data rooms come in because they can control access to the secure documents using a variety of features that can prevent physical printing and print screening through the use of watermarks, grid lines and other more technical approaches. Along with the user access controls of electronic data rooms is their capability to handle the huge amounts of data seen in most business transactions of today. This speeds up the lifecycle of the deal and cuts costs involved with moving physical documents and moving people around to perform due diligence and other time intensive processes.
Mergers and Acquisitions
Virtual data rooms used for mergers and acquisitions (M&A) have become so synonymous with the industry that the words “M&A data room” and “deal room” have become interchangeable. Virtual data rooms have optimised and secured every step of the M&A process from looking for buyers, carrying out due diligence to post-deal integration allowing deals to take place in a timeframe once thought impossible, while simultaneously cutting huge expenses associated with deals. The ability of M&A data rooms to ensure the right documents are accessed by the right people in a very useable and intuitive way has really spurred on their prominence in the industry to the extent that every major bank and law firm now have subscriptions to virtual data rooms.
Corporate document sharing
Moving away from business deals and transactions, online data rooms have found favour in large corporate businesses that are looking for ways to enhance efficiency within the organisation at the same time as embracing digital transformation. Virtual data rooms allow employees of large corporate to collaborate and share information and ideas on one centralised, highly secure platform. The risk of data breaches or lost documents is minimised and the ability to share work between departments has become exponentially easier. The appeal of virtual data rooms is that they are much more cost effective than designing a company-specific extranet and do not require full time employees to manage the software as all that is outsourced to the data room provider. The security also trumps that of traditional email servers and the customisability and central control makes the solution so popular and widespread among businesses at the forefront of their industries.
As with big business, many law firms have to deal with highly sensitive document sharing on a daily basis that is usually subject to stringent laws and regulations. Creating a legal extranet to deal with this is costly and has to be constantly maintained, so many firms are looking to software-as-a-service companies to fill this gap. Data rooms are being used more and more in the market as a way of facilitating the sharing of information while also maintaining compliance to the regulations through changing the settings of the virtual data room.