Keeping your documents and data safe in today’s digital world is super important, especially for legal pros like yourself.

That’s where virtual data rooms come in—they’re like digital fortresses for your sensitive info, and they’re getting more popular by the day among law firms.

In fact, 81% of the top 100 firms have invested in virtual data rooms to securely collaborate on documents.1

As you’ll learn in this guide, virtual data rooms are becoming a highly prioritized investment for legal practices of any size, especially given the rising number of data breaches among legal pros.

According to the American Bar Association’s 2022 Legal Technology Survey Report, 27% of law firms reported having experienced a security breach at some point.2

How do virtual data rooms benefit law firms?

1. Collaboration

An online virtual data room, with robust security measures, serves as the perfect platform for sharing information with opposing counsel, clients, experts, and other involved parties during the litigation proceedings.

2. Security

VDRs allow for far more secure communication than email and offer attorneys a high-level document protection.

PandaDoc Rooms provide audit trails, watermarking capabilities, two-factor authentication, encryption, password protection, recipient verification, and compliance with ISO standards on information security, and protected health information (PHI).

3. Time and cost savings

Utilizing a reputable, safe VDR for legal matters can help you save time and money while minimizing the inconvenience associated with document sharing and collaboration.

4. Analytics and reporting

Virtual data rooms offer analytics and reporting features that offer visibility into activities conducted within the VDR and its usage patterns.

You can see how frequently a document was accessed and viewed, the users displaying the highest activity levels within the VDR, or the frequency of searches performed.

Leveraging these capabilities not only facilitates more effective audits as required but also enhances overall operational efficiency.

We have seen at least a 30% increase in close rate with PandaDoc. It has simplified our previous process by eliminating the need to print, scan and return.

Rhett Marlow, President & CEO

Plus, the move to more deals happening remotely has identified that IT is an area that legal firms need to prioritize and invest heavily in.

According to PWC, cutting edge cloud solutions and advanced technology not only ensure efficiencies across departments, but combat cyber attacks and risks.

What is a virtual data room for law firms?

A virtual data room (VDR) for law firms is a secure online platform designed to store, manage, and share confidential legal documents.

It’s a modern solution that helps legal professionals efficiently handle sensitive information during various processes like litigation, mergers and acquisitions, legal due diligence, and other legal transactions.

With a VDR, legal teams can access and collaborate on documents from anywhere, as long as they have an internet connection and the necessary permissions.

This eliminates the need for traditional physical data rooms and ensures that all documents are centralized in one secure location.

Legal firms can use data rooms for a variety of use cases.

Here’s a snapshot of different use cases.

Corporate law

Consider a case where a multinational corporation is acquiring a smaller company.

Inside a virtual data room, the acquiring company’s legal team can securely access and review all relevant documents, such as contracts, financial records, and compliance documents.

This centralized platform accelerates the due diligence process, facilitating a smooth transaction while ensuring confidentiality and compliance.

Intellectual property

In the realm of intellectual property law, protecting sensitive information is non-negotiable.

Imagine a scenario where a tech startup is seeking an investment.

By employing a virtual data room like PandaDoc’s VDR, the startup’s legal team can securely share patent applications, trade secrets, and licensing agreements with potential investors.

This not only enhances investor confidence but also safeguards the startup’s intellectual property assets throughout the funding process.

Litigation attorneys

LPs can access a VDR from anywhere with an internet connection and this remote accessibility allows litigation attorneys to deal with vast amounts of documentation, ranging from evidence to legal briefs.

In a high-stakes lawsuit, efficient document management is key.

Take, for example, a complex commercial dispute.

By leveraging a virtual data room, the legal team can organize and share case-related documents with co-counsel, experts, and clients in a secure and organized manner.

This improves collaboration, streamlines case preparation, and ultimately strengthens the litigation strategy by ensuring high-level document protection.

Mergers and acquisitions (M&A)

Mergers and acquisitions involve extensive document exchange and negotiation between multiple parties.

In a competitive M&A landscape, time is of the essence. Picture a large-scale acquisition where multiple bidders are vying for the target company.

Utilizing a virtual data room streamlines the due diligence process, allowing potential buyers to access confidential information securely.

This transparency fosters trust among parties, expedites negotiations, and facilitates a successful transaction.

There are several ways using a data room can benefit your legal firm:

The benefits of having a legal data room

1. Improved security

Data rooms come with cutting-edge security features that will ensure that your clients’ information is kept confidential.

Access controls mean that only people authorized by the administrator are able to enter the data room.

Two-factor authentication for everyone who accesses the room combined with document encryption means the risk of a data breach is low.

2. Easier document management

Legal data rooms are optimized for lawyers to organize, search, and edit documents according to their needs.

Everyone in your firm will easily be able to work with the documents crucial to your operations rather than having to search across hundreds of unorganized folders and files.

3. Stronger collaboration

Collaborative work is the cornerstone of any good legal practice.

If you use a data room, you’ll no longer have to struggle with miscommunication over email, video calling, or instant messaging.

Instead, you can communicate through the data room, with the relevant data and documents in front of you.

Moreover, data rooms often include collaborative editing tools, meaning you can leave notes and queries on your colleagues’ work.

You’ll also be able to add an e-signature to documents within the data room.

4. Efficient cost savings

The costs that come with old-fashioned document management – such as printing and mailing – can soon stack up.

Virtual data rooms allow you to squash these expenses while ensuring you don’t have to spend resources on a physical data room.

5. Increased compliance

Data regulations such as GDPR are increasingly important for legal firms.

Thanks to their security, data rooms are fully compliant with these regulations, meaning you have more time to focus on more productive work.

When considering which data room service to use in your law firm, look out for these key features:

1. Access control

Legal data rooms give you complete control over who can access each specific file or document.

This means people can only view or edit the documents necessary to their role and that sensitive documents are kept confidential.

2. Document security

Similarly, data rooms include a variety of security measures to protect against unauthorized access and data breaches.

These can go from encryption to watermarking, while two-factor authentication adds an extra layer of security.

You can also add time or IP restrictions to restrict the viewing of documents to trusted devices within the working day and prevent screenshots or copies of sensitive information.

3. Collaboration tools

As well as security features, the best data rooms will include the sort of collaboration tools that make remote working much easier.

Features such as document commenting and notifications that alert users when updates are added streamline collaborative work.

Data rooms also include activity tracking.

This means you can see who has worked on specific documents and gain insights into how frequently documents are accessed and downloaded.

Choosing the best virtual data room for your law firm

Here are five steps to help guide you as you select the right virtual data room (VDR) for your law firm.

  1. First and foremost, prioritize security features, such as encryption protocols and user authentication mechanisms, to safeguard sensitive legal documents.
  2. Next, assess the ease of use and compatibility of the VDR with your existing workflows. Look for intuitive interfaces and seamless integration capabilities with other software tools commonly used in legal practice.
  3. Ensure that the chosen VDR can accommodate your evolving requirements without compromising performance or security.
  4. Evaluate the level of customer support and training offered by the VDR provider. Prompt assistance and comprehensive training resources can significantly enhance your firm’s experience with the platform.
  5. Lastly, consider the cost-effectiveness and value proposition of the VDR in relation to your budget and desired features.

While there are various options available in the market, PandaDoc stands out as the best choice for law firms, offering a robust yet user-friendly platform with advanced security measures, seamless integration capabilities, scalability, top-notch customer support, and excellent value for money.

Interested in trying PandaDoc Rooms to organize and share resources, collaborate with buyers and stakeholders, negotiate and complete the deal all within one personalized deal room

Request a demo today.


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 PandaDocs services are governed by our Terms of Use and Privacy Policy.

Originally published July 24, 2023, updated June 13, 2024