Virtual data rooms or VDRs refer to secure environments that allow authorized users to share and pull out data. In technical terms, it is a series of extranets that serve as a digital library of data.
Typically, companies and individuals use the Virtual Data Rooms to dump crucial information with their clients and partners, with the knowledge that their data remains secure.
You often see the VDR used in mergers and acquisitions (M&A), although it started as a repository of legal briefs and private communication between lawyer and client.
According to data, the VDR market is projected to grow to $1.3 billion by 2023, or more than double the $521.1 million it hit in 2017. The market has an estimated compound annual growth rate of an astounding 17.68% from 2018 to 2023.
The figure is not surprising considering the rising number of M&As. A report from JP Morgan revealed that the total transactions in 2018 reached $4.1 trillion. If you contextualize that, it is the third highest in the history of M&As.
A VDR vs. Deal Room
The VDR has been interchanged with the deal room. But even if they have similarities in function, the deal room takes the best qualities of a VDR and optimizing them for a specific goal.
In financial transactions that require top-secret confidentiality, the deal room is the best solution for each party involved. The solution leverages the VDR to address the complexities of the M&A.
In financial circles, the deal room is also called the due diligence room. And it works exactly as it sounds. All documents concerning the proposed deal will be uploaded in the cloud to be accessed, pored, and studied by the potential buyer. The technology speeds up the process of due diligence as you can share data in real-time.
A few other cloud-based storage solutions, such as Dropbox, for instance, are also used to share data. However, you could not expect the level of security on a free solution to be compared with the VDR. Besides, most of these online solutions are not designed to handle massive volumes of digital data.
How Much Does a Virtual Room Cost?
The price will depend on the vendor and the transaction volume. Typically, the service provider will quote per-page. If you go per-page pricing, your bill would quickly rack up to the thousands, especially if you are handling voluminous data. It is common for some companies to pay a bill of $20,000 for the Virtual Data Room.
But then again, nobody is complaining. When millions or billions are involved in total M&A transactions, $20,000 is nothing but a drop in a bucket.
With that said, there are better alternatives out there. Several vendors offer a fixed rate for the VDR, which you typically pay per month on a subscription basis. However, there is a limitation on the amount of storage you can utilize. For instance, a $100 fixed monthly rate would give you 5 GB of data. But you can quickly upgrade your package should you need more storage. It is a better option since you can track your expenses concerning the M&A transaction.