Maximizing the Power of Virtual Data Rooms

As one evaluates the functional benefits of VDRs, there are intangible factors to consider. With the greater adoption of technology such as Blackberries, e-mail and voice over IP, professionals tend to gravitate towards standardized Web behaviors. The intrinsic behaviors learned with these types of applications serve as underlying factors for a user to use or not to use a VDR. Therefore, successful adoption of the VDR technology comes when the VDR user interface follows the design and layout of familiar Web tools, such as Microsoft Outlook, as typical users do not have to learn new application behaviors.

Virtual 'Data' Room v. Virtual 'Deal' Room

In reviewing the variety of VDR options available on the market and choosing a provider, it is important to understand the differentiation between traditional virtual 'data' rooms and more comprehensive virtual 'deal' rooms.

Recent advances in VDR technology offer a comprehensive suite of features and greater functionality than ever before. These new capabilities have led to a subtle change in terminology used in the VDR industry. Virtual 'data' rooms were conceived to bring the due diligence process online, eliminating the travel and cost associated with traditional, physical data rooms. The traditional data room, and the virtual 'data' rooms that are now offered, are primarily intended to store and organize the corporate documentation required by transaction participants to perform due diligence. In addition, virtual 'data' rooms are useful as centralized document repositories for public companies that need to comply with Sarbanes-Oxley requirements for document retention and auditing.

Virtual 'deal' rooms go beyond the data room function and include an array of functions available specifically for teams involved with transaction closings. For instance, some virtual 'deal' rooms feature precedent management functions to store templates of checklists and transaction agreements from prior deals. Additionally, they provide a virtual collaboration space for use by a deal's legal advisors to create, exchange, negotiate, and edit versions of transaction documentation.

Pairing Technology with Service

Regardless of whether you choose a technology solution with the expanded features of a virtual deal room or the more traditional virtual data room format, it is essential to determine whether a provider has an accessible and knowledgeable technology support and services team. The role of the support team is not only to help you expeditiously implement the VDR technology for your firm, but also to help you apply it to your deals and transactions to yield more efficiency for all involved parties.

Most providers should be able to set up VDRs within 24-48 hours, and many can do same-day setup. Others allow you to initiate your own deal room whenever you need one simply by selecting 'New Deal' on the VDR menu. To ensure ease of use and convenience, you should determine whether your VDR solution has any software downloads or system requirements. Ideally, the VDR should place as few demands as possible on users. Confirm the availability of technical support to help administrators and users should they encounter any questions or problems to troubleshoot.

The VDR support team needs to be knowledgeable not only about the technology they provide, but also should have familiarity with corporate transactions and the responsibilities of the respective deal team members. This expertise ensures that the provider can tailor the technology specifically to your needs. Further- more, the VDR provider must be able to handle the support needs of the other deal team members when needed, and interact professionally with all deal participants.

Ensuring Data Integrity and Security

Security often represents a common concern among professionals new to VDRs. Most VDR providers have adopted stringent security methods and protocols to ensure the safety and accessibility of your deal-specific data and documents. In choosing a VDR, professionals should confirm that the provider utilizes industry-standard measures with procedures and systems in place to ensure the confidentiality of sensitive information.

The provider should guarantee the privacy of all deal room documents throughout the duration of the deal. Moreover, the system should offer an administrator full control over which folders and documents can be viewed by users and the type of access granted to these users. Most providers enforce access privileges with unique user name and password authentication and customized permissions for each user. Some systems allow documents to be watermarked for printing, displayed in read only formats and blocked from printing to specified users.

Additionally, the provider should conduct scheduled monitoring and regular audits of VDR activity to protect against user manipulation and external data theft. Redundancy measures should be in place to ensure the integrity of and accessibility to your data at all times to safeguard against a system outage.

Identifying Technology Features That Fit

Every firm and transaction has specific requirements. Professionals will need to determine which requirements are most important to their deal and choose the provider accordingly. Based on your deal requirements, understand which technology features are available and required for your transaction. Also determine whether access to certain features requires additional fees.

Recent advances in VDR technology have expanded the options to consider. For example, customization and private labeling represent a significant new development in the VDR market that many firms find attractive in reinforcing their respective client service and brand-building initiatives. A VDR can be branded with the company's corporate identity and a deal- or firm-specific Web address for accessing the VDR. Furthermore, customized sites may offer the ability to run multiple transactions simultaneously within a firm-specific VDR.

New VDR solutions on the market allow attorneys and other deal team members to collaborate on documents and conduct deal closings within a single deal management platform. This enables your VDR users to not only view transaction documents, but also revise and edit them ' if permitted ' via the VDR interface, as well as create closing sets of the final transaction documentation. In addition, precedent-management features that previously were unavailable now allow the user to store model data room checklists and transaction documents from prior deals within the VDR to be used as models for subsequent transactions.

Other advanced VDR features now available include a virtual dashboard that serves as the Web site landing page and provides a snapshot of most recent VDR activity. In addition, most providers feature working group directories with a listing of all authorized VDR users and their respective access levels with easy-to-use controls for adding or deleting users, controlling passwords, setting access levels and creating user-specific restrictions to particular folders, documents and deal rooms. VDRs can also offer auditing and reporting functions that record access to and activity within the VDR, and authorized users can generate standard reports of such activity.

Putting a VDR into Action

Once a VDR provider is chosen to suit your transactional needs, a deal team member from your firm will need to work with the provider to set up a VDR. If the feature is available, you can private label the VDR for the client upon request. If you choose to private label your VDR, you will need to provide the VDR provider with a digital logo and any other design specifications for the system interface.

There will be variations in the set-up of your VDR depending on your provider. However, many will follow similar steps in storing digital images of paper documents in a VDR and making the information available online. In general, documents must be: 1) scanned into a digital file format such as PDF or TIF (although many VDRs can also store other formats such as Microsoft Word or Excel formats); 2) imported into a Web-accessible database (generally stored on a VDR provider's servers); and 3) organized or filed within the database according to a deal-specific data room index. Some VDRs will offer a bulk document upload option to facilitate fast and easy upload of many documents simultaneously.

Once the documents are scanned, imported and organized, the provider makes them accessible to authorized users. Once they have access to the VDR, users have full reign ' depending upon permissions ' to conduct business within the VDR.

Alleviate Administrative Burdens

The advent of VDRs signals an evolution away from the common, paper-driven practices in managing the exchange and review of information during corporate transactions. A growing number of legal and financial professionals are drawn to using VDRs because of the advantages they offer over traditional data rooms and other methods of document sharing and collaboration.

With greater understanding of their options, professionals can maximize the value of VDRs for their organizations. By providing faster and more convenient access to information, reduced costs and improved functionality, VDRs are shifting the administrative burdens on legal and financial professionals towards third-party VDR providers who can perform the tasks more efficiently and at a lower cost. As VDR adoption continues to rise, new features and functions also will evolve to match the unique yet diverse needs of the legal industry.

A virtual data room ('VDR') is a secure Web-based version of a traditional physical data room used to facilitate document exchange and review in connection with corporate transactions. The technology emerged within the early 1990s to facilitate mergers and acquisitions and loan syndication transactions, and today supports a range of legal and financial transactions, such as IPOs and other securities transactions, real estate financings, private equity, venture capital, corporate restructuring and litigation matters.

VDRs offer legal and financial professionals an array of advantages. Overall, VDRs make it possible for lawyers and other deal advisers to focus more on the substantive work to be done and less on procedural aspects of deal management. By making the data room accessible over the Internet, VDRs help to accelerate the pace of the due diligence process. VDRs provide interested parties with convenient and instant access to deal-related documentation while reducing administrative expenses. Furthermore, VDRs provide professionals with the ability to monitor data room activity, including who accesses data room information and who views specific documents.

Professionals typically outsource VDR technology and support services to third-party VDR providers. For most firms, it would be considered cost prohibitive and logistically challenging to develop their own VDR technology platform. With a growing number of VDR providers and recent advances in technology, professionals have more options than ever when selecting a VDR solution for their transactional needs. When deciding to utilize VDR technology, professionals must understand VDR terminology, and the features and options available to better evaluate and maximize their technology investment.

As one evaluates the functional benefits of VDRs, there are intangible factors to consider. With the greater adoption of technology such as Blackberries, e-mail and voice over IP, professionals tend to gravitate towards standardized Web behaviors. The intrinsic behaviors learned with these types of applications serve as underlying factors for a user to use or not to use a VDR. Therefore, successful adoption of the VDR technology comes when the VDR user interface follows the design and layout of familiar Web tools, such as Microsoft Outlook, as typical users do not have to learn new application behaviors.

Virtual 'Data' Room v. Virtual 'Deal' Room

In reviewing the variety of VDR options available on the market and choosing a provider, it is important to understand the differentiation between traditional virtual 'data' rooms and more comprehensive virtual 'deal' rooms.

Recent advances in VDR technology offer a comprehensive suite of features and greater functionality than ever before. These new capabilities have led to a subtle change in terminology used in the VDR industry. Virtual 'data' rooms were conceived to bring the due diligence process online, eliminating the travel and cost associated with traditional, physical data rooms. The traditional data room, and the virtual 'data' rooms that are now offered, are primarily intended to store and organize the corporate documentation required by transaction participants to perform due diligence. In addition, virtual 'data' rooms are useful as centralized document repositories for public companies that need to comply with Sarbanes-Oxley requirements for document retention and auditing.

Virtual 'deal' rooms go beyond the data room function and include an array of functions available specifically for teams involved with transaction closings. For instance, some virtual 'deal' rooms feature precedent management functions to store templates of checklists and transaction agreements from prior deals. Additionally, they provide a virtual collaboration space for use by a deal's legal advisors to create, exchange, negotiate, and edit versions of transaction documentation.

Pairing Technology with Service

Regardless of whether you choose a technology solution with the expanded features of a virtual deal room or the more traditional virtual data room format, it is essential to determine whether a provider has an accessible and knowledgeable technology support and services team. The role of the support team is not only to help you expeditiously implement the VDR technology for your firm, but also to help you apply it to your deals and transactions to yield more efficiency for all involved parties.

Most providers should be able to set up VDRs within 24-48 hours, and many can do same-day setup. Others allow you to initiate your own deal room whenever you need one simply by selecting 'New Deal' on the VDR menu. To ensure ease of use and convenience, you should determine whether your VDR solution has any software downloads or system requirements. Ideally, the VDR should place as few demands as possible on users. Confirm the availability of technical support to help administrators and users should they encounter any questions or problems to troubleshoot.

The VDR support team needs to be knowledgeable not only about the technology they provide, but also should have familiarity with corporate transactions and the responsibilities of the respective deal team members. This expertise ensures that the provider can tailor the technology specifically to your needs. Further- more, the VDR provider must be able to handle the support needs of the other deal team members when needed, and interact professionally with all deal participants.

Ensuring Data Integrity and Security

Security often represents a common concern among professionals new to VDRs. Most VDR providers have adopted stringent security methods and protocols to ensure the safety and accessibility of your deal-specific data and documents. In choosing a VDR, professionals should confirm that the provider utilizes industry-standard measures with procedures and systems in place to ensure the confidentiality of sensitive information.

The provider should guarantee the privacy of all deal room documents throughout the duration of the deal. Moreover, the system should offer an administrator full control over which folders and documents can be viewed by users and the type of access granted to these users. Most providers enforce access privileges with unique user name and password authentication and customized permissions for each user. Some systems allow documents to be watermarked for printing, displayed in read only formats and blocked from printing to specified users.

Additionally, the provider should conduct scheduled monitoring and regular audits of VDR activity to protect against user manipulation and external data theft. Redundancy measures should be in place to ensure the integrity of and accessibility to your data at all times to safeguard against a system outage.

Identifying Technology Features That Fit

Every firm and transaction has specific requirements. Professionals will need to determine which requirements are most important to their deal and choose the provider accordingly. Based on your deal requirements, understand which technology features are available and required for your transaction. Also determine whether access to certain features requires additional fees.

Recent advances in VDR technology have expanded the options to consider. For example, customization and private labeling represent a significant new development in the VDR market that many firms find attractive in reinforcing their respective client service and brand-building initiatives. A VDR can be branded with the company's corporate identity and a deal- or firm-specific Web address for accessing the VDR. Furthermore, customized sites may offer the ability to run multiple transactions simultaneously within a firm-specific VDR.

New VDR solutions on the market allow attorneys and other deal team members to collaborate on documents and conduct deal closings within a single deal management platform. This enables your VDR users to not only view transaction documents, but also revise and edit them ' if permitted ' via the VDR interface, as well as create closing sets of the final transaction documentation. In addition, precedent-management features that previously were unavailable now allow the user to store model data room checklists and transaction documents from prior deals within the VDR to be used as models for subsequent transactions.

Other advanced VDR features now available include a virtual dashboard that serves as the Web site landing page and provides a snapshot of most recent VDR activity. In addition, most providers feature working group directories with a listing of all authorized VDR users and their respective access levels with easy-to-use controls for adding or deleting users, controlling passwords, setting access levels and creating user-specific restrictions to particular folders, documents and deal rooms. VDRs can also offer auditing and reporting functions that record access to and activity within the VDR, and authorized users can generate standard reports of such activity.

Putting a VDR into Action

Once a VDR provider is chosen to suit your transactional needs, a deal team member from your firm will need to work with the provider to set up a VDR. If the feature is available, you can private label the VDR for the client upon request. If you choose to private label your VDR, you will need to provide the VDR provider with a digital logo and any other design specifications for the system interface.

There will be variations in the set-up of your VDR depending on your provider. However, many will follow similar steps in storing digital images of paper documents in a VDR and making the information available online. In general, documents must be: 1) scanned into a digital file format such as PDF or TIF (although many VDRs can also store other formats such as Microsoft Word or Excel formats); 2) imported into a Web-accessible database (generally stored on a VDR provider's servers); and 3) organized or filed within the database according to a deal-specific data room index. Some VDRs will offer a bulk document upload option to facilitate fast and easy upload of many documents simultaneously.

Once the documents are scanned, imported and organized, the provider makes them accessible to authorized users. Once they have access to the VDR, users have full reign ' depending upon permissions ' to conduct business within the VDR.

Alleviate Administrative Burdens

The advent of VDRs signals an evolution away from the common, paper-driven practices in managing the exchange and review of information during corporate transactions. A growing number of legal and financial professionals are drawn to using VDRs because of the advantages they offer over traditional data rooms and other methods of document sharing and collaboration.

With greater understanding of their options, professionals can maximize the value of VDRs for their organizations. By providing faster and more convenient access to information, reduced costs and improved functionality, VDRs are shifting the administrative burdens on legal and financial professionals towards third-party VDR providers who can perform the tasks more efficiently and at a lower cost. As VDR adoption continues to rise, new features and functions also will evolve to match the unique yet diverse needs of the legal industry.