A virtual data room, or VDR, is a secure, online space acting as a repository of a company’s documentation, and serves as a virtual hub where company users share real-time information with other investors, clients or stakeholders when executing investment banking deals.

Read on to learn more about investment banking data rooms, their benefits, and tips you and your team can apply when deciding on the right one.

Let’s go!

Key takeaways

  • Virtual data rooms for investment banking are online spaces where documents are stored, due diligence is performed, and shared access is controlled with respect to all deals in an investment firm’s pipeline.
  • Advantages of VDRs include a secure environment, seamless collaboration and transparency between all stakeholders, and increased deal speed while reducing associated costs.
  • Use cases for investment banking data rooms include mergers and acquisitions (M&A), raising capital, seeking investors, and launching IPOs (initial public offerings).
  • Choose the right VDR provider for your team by pairing platform capabilities with your specific needs around contract management, document workflow, permissions access, and guided contract signing.

What is a data room for investment banking?

Virtual data rooms (VDRs) are centralized platforms accessed remotely by all parties connected to deals involving an investment bank.

Any complex financial transaction that would be done by the bank in a physical location — raising capital, launching an IPO, mergers and acquisitions, etc. — can be completed virtually via an online data repository.

The shared access is controlled, providing a secure, transparent environment that allows stakeholders to expedite the steps necessary to close the deal, such as carrying out due diligence and conducting negotiations.

Use cases for VDRs in investment banking

Mergers and Acquisitions

Investment banks can be involved with either side of M&A transactions.

VDRs designed with this in mind streamline communication and collaboration of all parties involved in a deal, keeping all the required documents in one convenient and secure space.

Sell-side M&A

For sell-side M&A, necessary documents are arranged in the VDR, granting potential buyers convenient access.

This setup enables these buyers to review critical documents regarding the sale of a company or its assets, which is fundamental to conducting due diligence.

Buy-side M&A

On the other side of the same coin, buy-side M&A participants use data rooms to help determine the projected profitability of the merger or acquisition.

A VDR speeds up and simplifies the due diligence process by conveniently presenting organized data for analysis and risk evaluation in one virtual space.

Raising capital

VDRs provide a secure and organized platform for presenting financial documents, business plans, and other sensitive information to potential investors.

They facilitate efficient and confidential sharing of vital information, ensuring that prospective backers can thoroughly evaluate an investment opportunity while maintaining the integrity and confidentiality of the shared documents.

Initial public offering

Data rooms are indispensable in managing the complexities involving legal, financial, and corporate records that are part of successfully launching an IPO.

The centralized hub that a VDR provides streamlines the review process for underwriters, lawyers, and auditors, ensuring regulatory compliance while speeding up the IPO journey.

Strategic partnerships

In forming strategic partnerships, virtual data rooms enable companies to share critical business information securely with potential partners, whether the partnership is between larger firms or small businesses.

The VDR platform accelerates exchanging due diligence materials, strategic plans, and sensitive data, enabling transparent and efficient negotiations so all sides can determine if the proposed partnership is a good fit.

5 benefits of VDRs for investment banking

1. Sensitive data protection

VDRs provide dedicated, secure storage for sharing confidential data with all parties involved.

To ensure high-level data protection, VDR providers must implement the latest security protocols in order to meet regulatory standards of privacy, data protection, and security.

Examples are HIPAA and FERPA in the US, and GDPR and eIDAS compliance across the EU.

2. Increased deal speed

VDR implementation facilitates the due diligence process and, therefore, speeds up the deal closure.

Contract management software gathers all the documents in one space, allowing all parties involved in the process to access and share data with the necessary recipients with a few clicks.

3. Reduced costs

When compared to physical data rooms (which involve extra expenses, such as rent, staffing, and security), virtual data rooms represent a cost-efficient solution, accessible via a simple monthly or annual subscription plan.

4. Intuitive access to docs + version control

VDR providers remove the occurrence of endless email threads with batches of documents and changes constantly getting overlooked.

Instead, document tracking software delivers a user-friendly interface and customization options for speeding up all aspects of the deal-making process, including cataloging versions of all docs along the way.

PandaDoc version control

5. Seamless collaboration

All interested parties in financial transactions must have the ability as well as appropriate permissions to collaborate effectively during the due diligence process.

Doing this virtually empowers all stakeholders in investment banking deals to collaborate far easier than with a physical data room.

Furthermore, data room providers are powered by a variety of additional services like proposal software, contract management tools, eSigning, and access to comprehensive document analytics for seamless collaboration.

Tips on choosing a VDR

Here’s what to look for when deciding on a data room provider:

Flat-rate pricing

Opt for VDRs with flat-rate billing (monthly/annually) that includes unlimited users, data, and protects against overage charges.

This is preferable over per-page pricing which can incur extra fees for large files and numerous users.

Ease of use

Select a provider that offers a seamless user experience, one suitable for any level of tech ability.

You want data room setup to be quick and intuitive, and access, collaboration and tasks like guided signing simple for all stakeholders.

Speed and efficiency

Choose a VDR with fast document handling capabilities.

Features to look for: drag-and-drop uploads, bulk sharing, integration with popular CRMs (Hubspot, Pipedrive, Salseforce, etc.).

Audit logs and reporting

Ensure your virtual data room offers detailed activity logs and audit trails.

These are necessary for monitoring document access as well as tailoring data for potential buyers or other VDR participants.

Deal-specific features

VDRs must cater to various investment banking needs. For example, stakeholders involved in M&As and strategic partnerships require the ability to conduct impeccable due diligence.

Likewise, bankers involved in raising capital or launching an IPO expect secure data storage and complete document control as indispensable features to successfully close deals.

Safety certification compliance

Investment banks that use data rooms are trusting their confidential information to a chosen provider; therefore, all data security certifications and encryption protocols must be compliant and up to date.

Secure, intuitive and customizable virtual data room for investments with PandaDoc

Take advantage of PandaDoc Rooms.

Our VDR makes the document reviewing, approval and eSigning process an easy ride for your clients and partners, even in cases involving numerous parties or multiple documents — all for a flat price.

Out of the box integrations, guided signing, access control, customization and compliance with all security protocols allows you to easily create virtual data rooms and enjoy outstanding document traceability.


PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDoc services are governed by our Terms of Use and Privacy Policy.