Virtual Data Rooms

Physical Data Rooms – The Days of Old 

In the old days – no more than two or three years ago! – organized sellers built their data rooms with rows and rows of three ring binders. (Less organized sellers forced buyers to stumble through boxes, file cabinets or worse.) Sellers often would house these paper collections of due diligence information in cramped, windowless conference rooms, usually located at lawyers’ offices or in nearby hotels. Buyers and their advisers would then travel to the data room to sift through the due diligence information manually, driven forward by the need to finish before the seller forced them out to make room for the next buyer, and motivated by endless supplies of coffee, doughnuts and pizza. 

Virtual Data Rooms – The Wave of the Future 

Today, many sellers forgo a physical data room in favor of a virtual data room on the Internet. Virtual data rooms are “built” by scanning documents into electronic files, which are then organized, indexed and posted on a secure website. The website becomes the electronic equivalent of a physical data room. A seller can build and host a virtual data room on its (or its legal counsel’s) network or it can engage a third party to do so. Potential buyers and their advisers can then “visit” a virtual data room from anywhere in the world.