What is a data room?

Before advances in computational technology made virtual data rooms possible, firms brokering the sale of large businesses would invite potential buyers to a secure, closely-monitored physical location (the data room) in order to disclose all the sensitive financial information required for the purchasing entity to make an informed decision—a process known as due diligence. Today, virtual data rooms have largely supplanted physical ones, eliminating the need for investors to travel to the location of the data and greatly streamlining the M&A process in general.