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A data room is a secure online repository that lets teams share documents and files in a way that is more efficient than email. It is commonly employed for due diligence purposes during an M&A. However it could be beneficial for businesses seeking to attract investors or for other project-based work requiring an extremely high level of confidentiality.

In M&A tendering, fundraising, and restructuring projects, there’s often a large amount of confidential information that is distributed to multiple parties. This makes it difficult to keep track of who has accessed what information, which versions are in use and when modifications were made. In a data room, all the data needed to be stored can be stored in one location, with access restricted by an administrator. It’s a great solution to prevent unauthorized information sharing and to ensure the compliance.

Virtual data rooms typically include various other features in addition to storage. Drag-and-drop, bulk upload, optical character recognition (OCR), dynamic watermarking, and advanced search capabilities can aid in finding documents quickly.

In addition to these features, most data rooms also provide tools for redaction that allow users to selectively block out parts of a document without breaking the file as in its entirety. This is especially useful to prevent omitting sensitive information in the document, which could have a significant impact on the outcome of a deal or project.