A data room is a space used for storing information such as contracts or corporate documents typically with the intent to share that information in a secure and/or confidential fashion with others (such as with a potential acquiror). A data room can be physical or virtual. Data rooms are often used to facilitate the completion of legal or financial due diligence during a transaction, but might be used for other purposes.
For example, a venture capital firm will want to review all the corporate documents (including charter documents, stock and option paperwork, contracts, etc.) of a startup before actually closing on an investment. Increasingly, this exchange of information is completed through a virtual data room that legal teams can access and review.
Last reviewed: May 18, 2021