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Private Equity Data Room: Why Use it & How to Run it (2024)

Kison Patel
Kison Patel

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

CEO and Founder of M&A Science and FirmRoom

Private equity funds are investment vehicles in which advisers pool together money invested in the fund by investors and use that money to make investments on behalf of the fund. Private equity funds provide a lucrative way to invest in long-term opportunities and engage actively with companies. While lucrative, private equity does not come without challenges.

Private equity funds must determine which investments will be the best decision based on target assessment, risk assessment through due diligence, deal pricing, and the most profitable exit strategy.

Private equity virtual data rooms can be a beneficial tool for private equity investors in making investment decisions. Finding a virtual data room with experience working with private equity firm sets funds up for success, and leads to profitable and mutually beneficial results. 

What is a Private Equity Data Room? 

A private equity virtual data room is an online document storage provider containing essential documents relating to a company or deal. Private equity data rooms allow full control of all necessary documents, for the due diligence process and beyond.

What is a Private Equity Data Room

Private equity data rooms come equipped with specific access levels to ensure the safety and security of all information. They can also facilitate business decisions by allowing information accessibility in an organized way, with collaborative properties.

Essentially, private equity data rooms are used by investors to determine where to invest their funds and, once decided, to ensure smooth deal closing. 

Private equity data room

How Data Rooms Support Private Equity Across the Investment Lifecycle

Private equity virtual data rooms can streamline the entire investment process and increase value at each stage of the private equity lifecycle, from fundraising to exit/long-term plans.

For a holistic M&A management process, managing multiple deals at once, and improving your M&A practice, you need to move beyond a data room, however.

As an example, DealRoom, leverages a platform designed specifically for M&A, as opposed to the secure data storage and due diligence process FirmRoom provides. Additionally, you can compare the benefits of both platforms in this side-by-side comparison.

How Data Rooms Support Private Equity Across the Investment Lifescycle


Funding documentation, such as term sheets, private placement memorandums, pitchbooks, and lasting power of attorneys, are crucial pieces of information that investors will need to access when deciding whether or not to engage in an investment.

With the use of a data room, this information can be shared efficiently and securely. User engagement can also be tracked to gain insight into investor interest, and see where more information may need to be added or what changes may need to be made in order to maximize funding and confidence in your adjustments.

Deal Sourcing 

Private equity virtual data rooms store information such as financial statements, leadership biographical information, and business plans in an organized manner. This information is easy to access and can be stored for any amount of time, making it simple to refer back to when investors are considering a deal.

With this, deals can be sourced and evaluated faster and more efficiently. Private equity data rooms can also help teams source and complete more deals in less time. 

Target Due Diligence 

Due diligence is a critical element of the private equity lifecycle. Investors need to look at a target’s strategy, operations, financial, tax, and other circumstances in a holistic manner to identify and understand existing value creation opportunities.

Diligence must be integrated and aligned with the investment case because the capital structure of a deal is mission-critical. Integrated diligence gives the investment committee the comfort to take more aggressive actions on debt levels and on the overall performance of the deal.

Diligence should bring all the thesis components together and portray a value-creation lens that includes delivery timing and costs. Data rooms can be used to collaborate on due diligence. Team members will have access to information and be able to store files in one secure location. Information can then be accessed by all other intended parties at any time in a secure manner.

With the due diligence document management features at FirmRoom, investors can gain perspectives that enable them to decide whether to pursue the target and bid with confidence. 

Deal Financing 

Financing, and the restructuring that may go along with it, are simplified with the use of a data room. Documents can be accessed in one place at all times and can be secured with user-level permissions. With advanced search features and redaction tools, FirmRoom can expedite the review of documents as well. 

Deal Negotiation

Data rooms are a single restricted platform, enabling collaboration among deal teams, portfolio company executives, and advisors during negotiations.

By simplifying the extensive due diligence process and centralizing all the deal-related data, a data room allows contributors to focus on the important parts of deal negotiation and spend less time compiling documentation. LOIs, NDAs, and CIMs can all be managed in one place, secured with user-level permissions.

Email and spreadsheet complexities are eliminated, helping teams move seamlessly into due diligence when key buyers emerge. Analytics can also help teams spot the most interested buyers. 

Value Creation/Exit 

Data rooms enable teams to evaluate information with real-time analytics, and provide instant access to important company data and documentation. Plus, portfolio company information is available at all times. Deal documents can be uploaded, indexed, and categorized quickly, and it is possible to collaborate with deal teams and advisors during this process.

Exits can also be managed easily with a virtual data room with final document uploading and redaction. Real-time analytics make deal preparedness possible. Finally, information redaction can be undone when exclusive buyers claim their stakes. All of this makes the exit process more efficient. 

Private Equity Data Room Features

While there are many choices of features available, here are some important ones to look out for when selecting your private equity data room.

These, along with any other features that best align with your company’s goals and objectives, should be considered when making a decision as to which provider to use. 

Data Room Features for Private Equity


When dealing with sensitive and confidential transactions, security is of the utmost importance. Features to look for include two-factor authentication, single sign-on, and restricted user login. The private equity data room you choose must meet security and regulations compliance as set by the SEC. Another specific feature to look out for is specific user permissions; with this, access can be granted to only those who need it and ensure that sensitive data stays in the right hands. 

Search and Organization 

With the use of a private equity data room to keep all of the necessary documentation and information in one secure storage location, it is easier for investors to find and review the information they need.

Utilizing the advanced document search features and a data room table of contents as a method of organization ensures that investors can find what they need as quickly as possible.

Drag-and-drop capabilities, folders and subfolders, and easy upload features are all specifics to look for. Further, version control ensures that investors are reviewing the most up-to-date and accurate document versions=. 

Streamlined Collaboration 

The use of a private equity virtual data room smoothens buyer interaction by allowing multiple bidders to have access to the room without knowing each other’s identities. Users are able to access information simultaneously and make edits in real time. Users can also use analytics to understand what investors are accessing and interested in. 


The data room that you choose should be compatible with all of the programs that you use each day, such as Excel and document files. 

Ease of Use 

A modern user interface and easy, efficient structuring are features to look for, as a private equity virtual data room only reaches its full capacity if everyone involved is able to use it. 

Compatible Pricing Structure 

There are multiple pricing structures for virtual data rooms, including per page, per user, storage size, and a flat monthly fee. Consider which will best facilitate the specific type of deals you will be investing in. 

How to Choose the Best Data Room for Private Equity 

Choosing the best data room for private equity can be a challenging decision to make. Decide what functionality, security, user-friendliness, and pricing structure you need when choosing which data room provider to work with.

How to Choose the Best Data Room for Private Equity 

For an in-depth comparison and each provider's features, check out the virtual data room providers comparison chart. 


The use of a data room ensures that all parties receive consistent information, while keeping admins in control of what each user is able to see. These rooms can be used to make the most profitable long-term decisions and lead to success for investors and sellers alike.

While there are many virtual data rooms to consider, FirmRoom has a long track record of private equity firms trusting us to achieve superior results through our intuitive, state-of-the-art data room. 

private equity data room benefits

Frequently Asked Questions (FAQs)

With FirmRoom, Private Equity transactions are made faster & easier than ever before, while meeting every security standard a company could possibly need.

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Key takeaways

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Virtual Data Room Comparison Guide

Compare VDRs and see the whole picture when it comes to choosing the best data room for your business.

Download the comparison