A business data room is a secure physical or virtual space to store, manage and share confidential documents related to high-stakes business transactions. A data room is a common tool used in mergers and acquisitions (M&A) as well as the initial publicly offered (IPO) or fundraising round. It allows multiple parties to perform due diligence while maintaining the privacy and security.

Due diligence can involve a wide variety of documents such as documents pertaining to intellectual property, financial records, and contracts. Utilizing a data room simplifies the process and makes it easier for stakeholders to review documents quickly, even from different locations and devices. A data room also allows companies to monitor access to sensitive documents and information in order to ensure that users who are not authorized are not able to download or view confidential files.

The most well-known use case for the use of a data room is M&A deals in which buyers require access to a variety of documents as part of due diligence. With a virtual data room that sellers can upload and organize all relevant documents into an organized folder structure that is accessible to anyone. The buyer is able to instantly access the documents. This reduces the time required to review documents, as well as the cost of transport and document handling.

A data room is also a way for teams to collaborate on projects in real-time. This is particularly useful for M&A processes where multiple parties need to read documents simultaneously. Additionally, most data rooms have a range of reporting features that allow companies to monitor user activity and observe how the data room is being utilized.