How To Perform an Effective Virtual Data Room Review

Finding the best data room for your specific needs can save you time, money, and headaches, ensuring your projects are completed on time and all parties involved are happy during the process. This guide outlines key factors to consider when selecting a data room and how you can go about performing an effective virtual data room review.

During M&A deals or corporate financial transactions, organizations need a Virtual Data Room (VDR) platform that will help them perform smooth due diligence and ensure seamless and secure document sharing and collaboration between parties.

Whether you’re an investment banker advising clients or part of a corporation looking to share sensitive documents beyond the firewall, a quick Google search will turn up a plethora of VDR providers ranging in price, functionality, ease of use, and efficiency.

Finding the best data room for your specific needs can save you time, money, and headaches. It is all-too-easy to fall into the habit of only using providers you are familiar with, or going with the cheapest option, without really considering the negative effects an ineffective VDR can have on your project.

How can you be certain you’re using the right tool for the job at the right price without doing your homework to understand how the various VDR providers stack up? It’s wise to periodically review the VDR options on the market to determine the right one for your needs, weighing product functionality, cost, and quality of customer support.   

In this article, we will outline a few key factors to consider when selecting a data room and how you can go about performing an effective data room review before you invest your money, time, and energy into a provider.

Know What You’re Looking for

Not every virtual data room will work for every user or business need. There are well-known legacy providers that maintain an older-style interface, packed with features — some of them useful, many of them not. Other, more modern providers, provide core features while avoiding unnecessary bloat, complexity, and confusion. This will guide your VDR research and review process. Here are two basic questions to keep in mind:

How long will you need your virtual data room and for how many projects?

If you’re an advisor, the first question you need to ask is how long your deal is likely to take you to close, and how many deals in a given year you’re likely to need a VDR to support. This will determine whether a single-use VDR transaction or an annual data room subscription that allows you to run multiple projects. As a rule of thumb, if you start more than two projects per year that require a data room, an annual VDR subscription is the most cost-effective option.

If you’re a corporation you will likely be running a single project, for 3 to 12 months.   That being said having an active project is a great opportunity to improve efficiencies in other areas of your organization.  Either by signing up to an unlimited use subscription, or by extending the term of your project, you can explore how data rooms improve processes such as RFP’s, compliance, audits, board reporting,  and fundraising, at minimal risk and cost.

How many documents will be stored in the VDR?

The more documents that you plan to share during your project, the more data storage you’ll need, which will factor into the price. Projects with a higher volume of documents will also require advanced organizational features, such as auto-indexing and search functionality. This will allow your users to review massive amounts of documentation more easily and efficiently. You may also require more robust security features such as watermarks and disabling print and download functions, reporting and auditing to make sure all those documents are tracked and remain protected and under your control.

Do Your Research

Once the fundamental requirements for a virtual data room have been established, it is time to research various providers. Having a hands-on approach to the selection process will ensure that you are better able to learn what these providers have to offer, the features that can be considered useful versus irrelevant, and whether or not the VDR is worth the investment. Here are a few simple research techniques to keep in mind:

• Look into all providers that fit your criteria and eliminate those that don’t. There are a lot out there, but only a few that will be a good match with what your company needs. This could be a support team that is available to help every step of the way (from setup to close), complex permission settings for different users and groups, or security and control features like dynamic watermarks.
• As a business owner, you have partnered with your advisor for assistance and expertise during the M&A process, so make sure to ask them which VDR they recommend, and why. Be wary if only one VDR is listed without a reason as to why. This can be a sign you are using an inferior or overly expensive data room.  
• As an advisor, question the status quo. You don’t need to recommend a data room to your client simply because your firm has been working with them in the past. The last thing you need is for an old bulky data room to cause friction with your clients, or worse cause you, or your team, to make a mistake. A quick review VDR providers can make your clients happier and save you hours during the deal. Things like view as, easy to use user permissions, modern intuitive interfaces, and a great support team can make the deal process less painful for your clients, and save you hours of headaches.
• It is also important, as an advisor, to choose a provider for their product, rather than the perks they offer for partnering with them. The more time and money a VDR provider spends on drinks, gifts and other “perks” the less time and money they are spending on their product.  This means you end up spending more time hanging with your data room rep, more time dealing with an inferior product, and less time with the people you care about. Gifts and perks can be a good thing, just make sure your provider has the product to back it up. By doing your research, you can find a modern top-tier data room that will make your deal easier and get you out of the office faster.

How to Spot Fake Virtual Data Room Reviews

When researching virtual data rooms, you will encounter either brief or in-depth reviews of providers and their features. While many of these can be quite useful when written from a reputable source, there are instances when you will stumble upon a fake review written to favor a provider or to completely tear them down. It is important to be able to differentiate real reviews from fake ones while you search for the best VDR for your company.

The review you are reading might be fake if:

• It seems biased (highly negative or highly positive) with no helpful critical information to highlight the pros or cons of a provider.
• If you see the same, or similar layout across multiple sites, with the same provider being favored.           
• If one provider is favored. Be sure to check multiple sites and recognize if one provider seems to be mentioned favorably in all of them. Fake review sites will also have similar layouts and poor quality to both their content and presentation.
• If the copy doesn’t make sense or has similar wording is used over and over again throughout the review, as though the writer is running out of relevant information to discuss. Conversely, a real review site will have many reviews for a variety of providers and will take the time to review multiple products in depth.
• User reviews  – real review sites will have reviews from verified users.  

Finding the ideal virtual data room does not have to be difficult. There are tools and services created specifically to help clients understand the qualities they need from their data room software and decide on who the best companies are to provide them. Be sure to know what you’re looking for and how to spot any non-legit reviews that might come your way throughout the selection process.

Illustration by Christy Lundy