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A virtual data room, more commonly known as a VDR, refers to a database located online which avails companies the opportunity to store and share sensitive and top-secret information, especially during financial transactions. It is a type of document filing system or electronic repository. One very common occurrence that calls for the use of a virtual data room is during mergers and acquisitions due diligence. Since mergers usually require copious amounts of research, most of which is confidential information, a VDR is used. In case the merger or acquisition does not fall through, access can easily be withdrawn.
The virtual data room market has experienced a very high rate of growth mainly due to the fact that a number of enterprises have adopted it as an essential tool. Thanks to the growing need to improve risk management, as well as intellectual property, essential business data, and information needs, there has been a progressive demand for VDRs. This, in turn, has boosted the growth of the virtual data room market beyond the expectations of a number of experts who expected less rapid growth.
Statistical forecasts show that the virtual data room market is heading in the right direction by establishing a CAGR of 15.12% during the forecast period between 2019 – 2024. Cloud storage technology is being adopted as well and this is adding substantially to the global virtual data room market growth. Switching to this method of data storage has lots of perks that many people are constantly exploiting. Data room storage saves users from the costly expenses associated with physical data rooms, such as the cost and frequency of travel. Plus there is no need for massive amounts of physical paperwork. Everything is much more organized and easily accessible.
Most virtual data rooms adhere to strict security protocols such as SOC 1/SSAE 16/ISAE 3402, SOC 2 Type II, FISMA, DIACAP, and FedRAMP, ISO 9001 / ISO 27001, and more. They also include data encryption, accident redemption, file backups, strict ID protocol, customizable allowances, and inclusive security reporting. Access to files, data, and information has to be given and can be revoked at any time.
Apart from these, here are some other trends in the Virtual Data Room Market:
Virtual data rooms are essentially meeting rooms where parties can meet and discuss an upcoming transaction online. This has made transactions between various parties a lot more reliable, simple, and smooth since VDR tools are available 24/7. Similarly, for the parties involved in “checks and balances” such as the auditors and participants, it is easier to determine if various security protocols surrounding opening, printing, and sharing, documents, have been met.
Within the IT world, virtual data room security is being beefed up and made even tighter thanks to certain newly emerging blockchain technologies. In addition, the application of virtual data rooms is becoming broader and a lot more common since many business operations are being conducted online. This is one of the reasons that the application of the VDR has extended beyond just M&A activities. Since information is the basis of almost everything thinkable, a number of well-known telecom and IT companies possess various integrated technologies that guarantee a rapid, efficient, and effective flow of communication.
Virtual data rooms comprise a number of major stakeholders and players and are becoming highly competitive as well. Due to new innovations such as cloud technology, some of these players are carrying out a rapid expansion of their existing businesses to span across a number of viable and promising emerging economies. Similarly, the untapped marketplace is becoming occupied quickly due to the increase in its market presence across this space. For instance, in April 2019, Citrix Systems publicly announced the Citrix SD-WAN, a virtual instance of the SD-WAN appliance.
They also announced the Citrix ADC which is an application delivery controller and would be available from 2019 within the GCP marketplace. In order to make use of Virtualized SD-WAN offerings, Citrix makes use of the Google Cloud Platform. Similarly, Capco, which is a foremost management and technology consultancy with its services aimed at improving the financial services industry entered into an agreement with Interlinks. The goal of this deal was that Capco users all over the world could conduct business easily and collaborate in a secure manner with a centralized administration that is easy to manage.
North America has been discovered to be the continent with the largest share in the virtual data room market. This is mainly due to the rapid increase in the adoption and use of virtual data room services by various businesses and organizations. In a number of developed economies such as the United States and Canada, the adoption of data room services is fast becoming a normal trend.
Similarly, there is a rapidly rising need for safe and secure data transport. This increasing demand for safe and easy methods to ensure secure storage of important data is one of the reasons for virtual data rooms. Similarly, the rising need for efficient and transparent data-sharing ways or options is serving as a point of reference for secure sharing solutions and data security. Due to this need, there is an estimated increase in demand across North America especially spanning the time frame of the forecast period. Similarly, a rising amount of mergers and acquisitions alongside fundraising and collaboration with major stakeholders has served as a reason for market growth.
Virtual data rooms also continue to develop and adopt new technologies. For example, one newer provider, named DealRoom, has recently emerged as a virtual data room and project management software. The software not only includes traditional virtual data room features, such as secure, online data storage but also includes project management features. The project management features are specifically designed to help teams manage due diligence more efficiently. By combining traditional virtual data room features with project management, teams no longer have to switch between Excel trackers, a virtual data room, and email during diligence. Everything can be completed on one platform.
A one-stop-shop method is becoming more and more popular among those managing M&A transactions, such as investment banks and corporate development teams. They can use advanced technology to speed up due diligence and also have a way to manage other aspects of the deal such as post-close integration.
It is expected to see the virtual data room market take on more technology such as artificial intelligence and smart file search. These time-saving tech features greatly benefit users by helping them streamline their processes and operate as efficiently as possible.
There are many different types of virtual data room providers available, some designed for specific industries, others for more broad use. Whatever your need, there is an appropriate virtual data room provider out there.
In conclusion, the virtual data room market is forecasted to become one of the largest markets thanks to its rapid growth. M&A activity hit a record high in 2018, and 2019 has proven to be a strong year as well. Due to this fact alone, the use of virtual data rooms is bound to continue to rise.
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