Data room definition
What does Data room mean?
As part of the due diligence and disclosure process in a share or asset sale, a physical or virtual space set up by the seller to make available legal, commercial and financial information relating to the target company/target business for review by prospective buyers. It is commonly used in an auction process where there will be a number of interested parties, but it is now used in a broad variety of transactions (especially because of the convenience of a virtual data room).
A physical data room (PDR) is a room filled with documents and files. It would typically be set up in a room at the offices of the seller’s solicitors or financial advisers, rather than at the seller's offices. This is to avoid disruption to the seller's business on a day-to-day basis and to keep the transaction confidential from employees. Where a transaction has a multi-jurisdictional element, a number of PDRs can be set up at any one time in each local jurisdiction.
A virtual data room (VDR) is an online (often cloud-based) repository and document sharing platform which is set up by the seller to give potential buyers and their advisers access to the documents and information that they need to conduct their due diligence exercise in relation to the target company/target business.