7 November, 2023

Mergers and acquisitions (M&A) are complex transactions that require meticulous planning, due diligence, and the secure exchange of sensitive information between the parties involved. In the digital age, the use of a Virtual Data Room (VDR) has become a game-changer for streamlining the M&A process and reducing risk.

VDRs are secure online repositories for storing and sharing confidential documents, and they offer a multitude of benefits and advantages that enhance the efficiency and effectiveness of M&A deals. Let's take a look at some of the ways virtual data rooms have revolutionized how M&A transactions are conducted.

Enhanced Document Security

One of the foremost benefits of VDRs in M&A is the enhanced security they provide. Traditional methods of sharing sensitive documents, such as email attachments or physical copies, pose significant security risks. VDRs, on the other hand, are equipped with robust security features ensuring that only authorized individuals can access and view confidential documents, reducing the risk of data breaches and leaks.

virtual data rooms in m&a

Here are some ways in which VDRs enhance document security:

End-to-End Encryption

Data in VDRs is typically encrypted both in transit and at rest. This means that documents are secured during transfer and while they are stored on the server. Encryption helps prevent unauthorized access to the documents, even if the server is compromised. End-to-end encryption (E2EE) is a security protocol designed to ensure that only the intended recipients of a message or data can access and read it, while preventing unauthorized parties, including service providers and hackers, from intercepting or deciphering the content.

Key features and benefits of end-to-end encryption include:


E2EE ensures that only the sender and intended recipient can access the message, making it highly resistant to eavesdropping or surveillance.


The use of strong encryption algorithms and the separation of keys make it difficult for unauthorized parties to decrypt the content.


Users can trust that their messages and data are secure, even when stored on third-party servers, as service providers cannot access the encrypted content.

Data Integrity

E2EE also ensures the integrity of the data, as any unauthorized tampering with the ciphertext will render it undecipherable.

Protection from Service Providers

Even the service providers themselves cannot access the content, which prevents them from sharing user data or complying with government requests for data access without user consent.

It's important to note that while end-to-end encryption enhances privacy and security, it does not protect against all forms of threats, such as malware on the sender's or recipient's devices, which could compromise the security of the message before or after encryption. Additionally, the security of E2EE depends on the strength of the encryption algorithms and the protection of the private keys.

Access Control

VDRs allow administrators to define and control user access to documents and folders. Role-based permissions ensure that only authorized individuals can view, edit, or download specific documents. This minimizes the risk of data leaks or unauthorized access.

Two-Factor Authentication (2FA)

VDRs often support two-factor authentication, requiring users to provide two forms of identification (e.g., a password and a one-time code sent to their mobile device) before gaining access. This adds an extra layer of security to user accounts.

virtual data rooms for m&a

Document Expiry and Access Revocation

Security policies can be configured to expire file permissions either on an absolute date or after a relative delay (number of days) from the date / time the files were uploaded. After expiration, the corresponding users will no longer be able to access files to which the policy has been assigned. The optional notification setting, when enabled, sends an email alert to administrators upon expiration.

The expiration feature allows administrators to automatically enforce deadlines associated with the due diligence process. Using this feature in combination with Information Rights Management (IRM), means that even documents that have already been downloaded cannot be opened after expiration. An expiration feature helps prevent information from being accessed or shared after it is no longer needed or authorized.


VDRs with a watermarking feature allows administrators to automatically apply customized, dynamic watermarks to each page of protected documents and spreadsheets, as well as to protected videos. Watermarks are clearly visible, applied diagonally across the page or screen, yet do not interfere with the readability of the underlying text. The watermark text is customizable, and administrators can embed the following dynamic information:

  • User's name
  • User's email address
  • User's IP address
  • Current date
  • Current time

Watermarking provides a clear indication to the reader that the content of a document is confidential, and since the user identity can be included in the watermark, it allows for a simple but effective deterrent against distribution of the printed documents to unauthorized readers.

Audit Trails and Activity Monitoring

VDRs maintain detailed audit logs that record user activities such as document access, downloads, and edits. This provides an audit trail for accountability and compliance purposes, helping organizations track who has interacted with their documents.

Secure Viewing and Access Restrictions

Some VDRs offer secure viewing options that allow users to view documents without downloading them. This protects against the risk of documents being saved or shared outside of the platform.

Secure Document Uploading

VDRs typically provide secure ways to upload documents, including virus scanning and malware detection, to ensure that malicious files are not introduced into the system.

Data Room Locking

In some situations, organizations may need to temporarily lock access to the entire VDR during sensitive transactions, such as mergers and acquisitions, to prevent unauthorized access or changes.

Compliance and Certifications

Many VDR providers adhere to industry standards and certifications, such as ISO 27001, SOC 2, or GDPR compliance, which demonstrate their commitment to maintaining high levels of security and data protection.

Secure Collaboration Tools

VDRs often include collaboration features like secure Q&A sections, redaction tools, and user commenting. These tools help users work together on documents while maintaining security.

By implementing these security features and best practices, VDRs help organizations protect their confidential documents and data, making them a valuable tool in various industries, including legal, financial, healthcare, and mergers and acquisitions.

Improved Document Organization

In M&A transactions, there is often a vast amount of documents to manage, ranging from financial statements to legal contracts. VDRs offer superior document organization and indexing capabilities, allowing users to easily search for and access the information they need. This streamlines the due diligence process, saving valuable time and reducing the likelihood of overlooking critical details.

Among VDR providers, one in particular has innovated a very slick feature for organizing documents. ShareVault's unique hierarchical tags feature provides all of the advantages of folders, but with additional flexibility, not available in any other solution.

This can be particularly valuable for creating an efficient due diligence list in your data room. Frequently, it is important to place the same file in multiple locations in your hierarchical organization. With other solutions, you are required to either put placeholder documents in the appropriate locations that refer to the actual document, or make multiple copies of the file, and place the copies accordingly.

In addition to the cost of the additional storage, you'll need to keep track of each of the copies of the same document. With ShareVault, just tag the same file with multiple tags, and the same file will be shown in each location. This clean and elegant approach provides the best of both folders and tags, and it's only available from ShareVault. Watch a video here that demonstrates how ShareVault's tag editing features work.

Streamlined Due Diligence

Due diligence is a critical phase in M&A where both parties evaluate each other's financial, legal, and operational aspects. VDRs simplify this process by providing a centralized platform where all relevant documents are stored and organized. This eliminates the need for physical meetings and the exchange of documents through traditional means, such as email, speeding up due diligence and improving collaboration among stakeholders.

Access Control and Permissions

Virtual data rooms offer fine-grained access control and permission settings. Deal organizers can grant different levels of access to various parties, ensuring that sensitive information is only disclosed to those who need it. This level of control enhances confidentiality and allows for a more secure sharing environment, especially when dealing with multiple parties with varying roles in the M&A process.

A VDR platform that provides fully-configurable file security policies allows administrators to define the appropriate levels of file protection both for documents and users. For each policy, administrators can specify whether or not users have the right to print, save, copy/paste text, capture the screen, and which, if any, watermark should be applied. In addition, administrators can specify an absolute or relative expiration date.

Much more flexible than the limited view/print/save levels provided by a more basic virtual data room, a full-featured, state-of-the-art data room gives administrators the ability to easily control exactly what rights each user has when accessing content. And, because security policies are so simple to change, they can easily be modified as the project progresses.


Traditional M&A transactions often involve significant expenses related to physical document storage, printing, and transportation. VDRs significantly reduce these costs by eliminating the need for physical documents and the logistics associated with them. Additionally, they cut down on travel expenses associated with in-person meetings and due diligence, as stakeholders can access and review documents from anywhere with an internet connection.

Although most VDR platforms effectively streamline the due diligence process which translates into reduced costs it's important to note that not all VDR platforms provide similar pricing structures.

When evaluating the cost of virtual data rooms, don't limit the evaluation merely to the VDR's short-term or purchase price, but consider its long-term price, or the total cost of ownership. The total cost of ownership includes the purchase cost and any opportunity costs that can be incurred or saved along the way.

Consider a virtual data room that costs $100 per month, but is slow and hard to use, versus an efficient VDR that significantly accelerates document review but costs $200 per month. A project housed in the cheaper VDR might run for six months or a year, whereas a project in the more efficient data room might wrap up in as little as 60 days. Although priced higher, the more efficient data room has a lower total cost of ownership.

Faster Deal Closings

The efficiency gained through the use of VDRs leads to faster deal closings. This speed is advantageous in competitive markets where timing can make a significant difference. VDRs can streamline the M&A due diligence process in the following ways:

Virtual data rooms for M&A deals

Efficient Document Management

VDRs allow M&A professionals to upload, organize, and share documents electronically. This eliminates the need for physical document exchange, which can be time-consuming and cumbersome. Documents are easily searchable, and stakeholders can access them instantly, speeding up the due diligence process.

Improved Accessibility

VDRs provide 24/7 access to data and documents from anywhere with an internet connection. This accessibility allows potential buyers and sellers to review information at their convenience, reducing scheduling conflicts and delays.

Enhanced Collaboration

VDRs enable real-time collaboration among various parties involved in the M&A transaction, including legal teams, financial advisors, and management teams. Collaborative tools within VDRs facilitate discussions and negotiations, leading to quicker decision-making.

Streamlined Communication

VDRs often include features for secure communication, such as Q&A sections where potential buyers can ask questions, and sellers can provide answers. This eliminates the need for lengthy email threads and ensures that all parties have access to the same information.

Data Security

VDRs are designed with robust security measures to protect sensitive information. This reassures both buyers and sellers that their data is safe, reducing concerns and potential delays related to security issues.

Faster Due Diligence

VDRs enable more efficient due diligence processes. Buyers can quickly assess the quality and completeness of information, helping them make informed decisions faster. This reduces the time spent on due diligence, a critical phase in any M&A deal.

Increased Transparency

VDRs promote transparency in M&A transactions by providing an audit trail of who accessed which documents and when. This transparency can build trust among parties and reduce the need for additional verification steps.

Global Collaboration

M&A deals often involve parties located in different regions or even different continents. Virtual data rooms enable seamless global collaboration by providing a platform where stakeholders can access and review documents regardless of their geographic location. This globalization of M&A processes opens up opportunities for companies to engage in cross-border transactions more efficiently.

Compliance and Audit Trails

Maintaining compliance with regulatory requirements is paramount in M&A deals. VDRs offer features that create detailed audit trails, tracking who accessed which documents and when. Administrators can generate a comprehensive audit trail which includes every user login, agreement clickthrough, video watched or document viewed, printed or downloaded, with comprehensive specificity. Administrators can trace the chronology of activities by user and gain insights into their interest level and what they care about.This transparency not only helps with compliance but also serves as a valuable resource in case of disputes or investigations.


In the world of mergers and acquisitions, virtual data rooms have emerged as indispensable tools. Their benefits, including enhanced security, streamlined due diligence, cost-efficiency, and global collaboration, significantly improve the efficiency and effectiveness of the M&A process.

As technology continues to evolve, virtual data rooms are likely to become even more sophisticated, further simplifying and optimizing the complex world of M&A transactions. Embracing this technology is not just a choice; it's a necessity for companies looking to thrive in today's fast-paced business environment.

ShareVault has been providing organizations of all types and sizes with secure document sharing solutions for over 15 years.

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