Virtual Data Room Market

Market Overview

The global virtual data room market size was valued at USD 2.23 billion in 2023. It is estimated to reach USD 5.76 billion by 2032, growing at a CAGR of 12.6% during the forecast period (2024–2032).  The adoption of virtual data room solutions is increasing by venture capital firms, enabling them to conduct the processes associated with offering due diligence and document preparation in an efficient and cost-effective approach compared to physical data rooms, stimulating market growth.

A virtual data room is an online repository or secured virtual space designed to store and share confidential and sensitive information during business transactions. It is commonly used in mergers and acquisitions, due diligence processes, initial public offerings (IPOs), fundraising, and legal proceedings. The primary function of a VDR is to provide a secure and controlled environment where authorized individuals or parties can access, review, and collaborate on documents and files. One of the main reasons for using a Virtual Data Room is to ensure the confidentiality and integrity of sensitive information. By utilizing features like access controls, document encryption, and digital rights management, VDRs protect data from unauthorized access and mitigate the risk of data breaches. These security measures make VDRs a trusted solution for handling confidential documents during critical business activities.

Virtual Data Rooms (VDR) have become a valuable tool for corporations, law firms, investment banks, private equity firms, and other organizations involved in complex financial or legal transactions. They offer a secure, efficient, and controlled environment for sharing sensitive information, ensuring that transactions proceed smoothly while maintaining the confidentiality of critical data.

Market Dynamics

Global Virtual Data Room Market Drivers:

Rise in Need to Securely Store and Transact Massive Volume of Data During Merger and Acquisition

With the continuous increases in the volume of data and the rise in data sources, organizations have focused on organizing and securely storing this data. The advanced capabilities such as access security, document security, and user interface of virtual data room have led to the development of powerful platforms on which merger and acquisition (M&A) can be managed effortlessly. The virtual data room solution is limited to due diligence processes and is becoming a medium for managing the entire deal cycle. In addition, virtual data room providers use 256-bit and 512-bit encryption to secure the confidential data of their buyers. Thus, BFSI institutions leverage these benefits of VDRs for their routine business activities and use them as corporate repositories and sharing information, thereby fueling the growth of this market.

Furthermore, crucial functions of virtual data rooms, such as granting different levels of secure access for various stakeholders, editing of documents, search function, and intelligent file indexing, are boosting the demand for this solution, which significantly contributes toward the growth of this market.

Increase in Demand from Venture Capitals

The adoption of virtual data room solutions is increasing by venture capital firms, enabling them to conduct the processes associated with offering due diligence and document preparation in an efficient and cost-effective approach compared to physical data rooms. An increase in the number of venture capital deals in 2017 led to higher demand for virtual data rooms.

In addition, various firms have increased their usage of virtual data rooms due to the benefits offered by these services over physical alternatives, such as time and money savings and the possibility of involving a larger number of bidders in deals. For instance, till September 2017, the demand from venture capital firms represented 39.8% of total revenues for the virtual data rooms industry. Thus, such extensive demand from venture capitalists for VDR software is expected to boost the growth of the global virtual data room market.

Global Virtual Data Room Market Restraints:

Cyber Security Concerns Associated with Virtual Data Room

Security breaches and high-profile hacking have increased substantially recently, especially in virtual data rooms. Security concerns over protecting company information and private data majorly restrain the cloud storage deployment by several industrial sectors, including BFSI, government, healthcare, and retail. Security risks, including organizational, physical, technological, compliance, and data breaches, are major factors expected to hamper the market growth.

Furthermore, hacking cases have recently been identified globally where the data is breached and published publicly. In addition, as the resources are being distributed among various data room clients, the privacy and security of the data are facing a major threat from unethical or eavesdropper clients. Thus, the alarming increase in data security and privacy risk is a major factor restraining the expansion of the global virtual data room market.

Global Virtual Data Room Market Opportunities:

Surge in Adoption of Virtual Data Rooms Among SMEs

Virtual data room is applicable across various industries, including BFSI, online shopping, retail, and healthcare. Moreover, several new applications for data rooms have been witnessed in recent years, and their potential can be used to enhance the security of SMEs. A virtual data room in enterprises is evolving due to its variant feature of storing on the cloud, making these enterprises secure crucial business-related data. Thus, adopting virtual data rooms in various organizations has helped them achieve data security and reliability.

Moreover, a cloud-based virtual data room helps organizations to provide different applications to the employees, which include desktop virtualization and cloud-enabled BOYD. For instance, a research study has found that around 22% of companies use biometrics as a service, and another 28% of the companies worldwide plan to deploy it soon. Furthermore, companies provide data room on the cloud to increase usability, enhance customer experience, and minimize the risk of cyberattack threats.

Regional Analysis

Based on region, the global virtual data room market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

North America Dominates the Global Market

North America is the most significant global virtual data room market shareholder and is estimated to grow at a CAGR of 10.6% over the forecast period. The virtual data room market in North America is analyzed across the U.S. and Canada. The U.S. is one of the largest markets for VDR. It is home to some of the major players in the virtual data room, making it a lucrative innovation region. Businesses in North America have adopted virtual data rooms to securely organize, store, and transact massive volumes of data in organizations in an advanced manner. In addition, organizations are adopting these solutions to effectively prepare data for performing accurate analysis for informed decision-making. The BFSI industry is vertical and utilizes a virtual data room to conduct M&A transactions securely. The large export industry in the U.S. is further driving the adoption of deal rooms, propelling the growth of this region's virtual data room market.

Europe is anticipated to exhibit a CAGR of 13.8% over the forecast period. The European virtual data room market is analyzed across the UK, Germany, France, Italy, Spain, Russia, and the rest of Europe. Although the on-premise deployment is considerable in Europe, penetration and availability of cloud technology for mass users are expected to offer significant opportunities for the growth of the VDR market. In addition, implementing several government rules and regulations to increase the privacy and security of organizations propels the growth of the virtual data room market. Furthermore, growing traffic in prime data management establishments, such as data centers not constructed to perform secure transactions, is a key factor driving the demand for VDRs. Moreover, the major shift toward cloud deployments, the need for cost-effective data volume storage, and the increase in the adoption of automation platforms are driving the market's growth.

The Asia-Pacific virtual data room market is analyzed across China, India, Japan, Australia, and the rest of Asia-Pacific. An increase in the requirement for secure and easy means for storage of sensitive data and a surge in the need for transparent and efficient data sharing options are driving the expansion of the virtual data room market in Asia-Pacific. Furthermore, implementing government regulations regarding safely operating and storing data across companies is boosting the growth of this market.

LAMEA region is presently experiencing low adoption of virtual data room software and related services compared to the rest of the regions, owing to fewer financial activities. However, this region is anticipated to witness a moderate growth rate during the anticipated period, owing to increased awareness about digitalization and cloud-based technology and a rise in big data technology adoption. In addition, an increase in investment by major companies to strengthen their presence in untapped regions is expected to drive the need for secure data storage and transfer solutions during M&A strategies.

Segmental Analysis

The global virtual data room market is bifurcated into components, deployment mode, organization size, business functions, and industry verticals.

Based on components, the global virtual data room market is bifurcated into solutions and services.

The solution segment dominates the global market and is projected to exhibit a CAGR of 12.2% over the forecast period. The solution segment dominated the overall virtual room data market in 2022 and is expected to continue this trend during the anticipated period due to an increase in the adoption of IoT devices among commercial and residential sectors, which, in turn, creates a higher demand for virtual data rooms. Most of these organizations have started adopting these virtual data room solutions to provide enhanced security to their extremely sensitive data and provide different security measures such as multifactor authentication and closed operating systems. Furthermore, important players in the market are adopting numerous strategies to improve their product portfolio, which is expected to drive the market's growth.

Based on deployment mode, the global virtual data room market is bifurcated into on-premises and cloud.

The on-premises segment dominates the global market and is projected to exhibit a CAGR of 11.8% over the forecast period. The on-premises deployment model for virtual data room software enables installation of the solutions and permits services to run on systems present in the premises of organizations instead of being put on server space or cloud. These solutions offer enhanced security features, which drive their adoption in large-scale financial institutions and other data-sensitive organizations where security is a priority. On-premises-based solutions are known for enhanced maintenance of servers and a continuous system to help with the execution of these virtual data rooms. In addition, the on-premises deployment mode is considered significantly useful in large enterprises, as it involves significant investment to implement, and organizations need to purchase interconnected servers as well as solutions to manage the system.

Based on organization size, the global virtual data room market is bifurcated into large enterprises and small and medium enterprises.

The large enterprises segment dominates the global market and is projected to exhibit a CAGR of 11.5% over the forecast period. Large enterprises have a workforce of more than 1,000 employees. These enterprises generate massive volumes of data and are more concerned about the protection and security of their data during their business deals. Furthermore, they have a dedicated IT team to manage security operations and periodically ensure practices such as patch management, standards compliance, and change policies. The legal data is extremely sensitive and requires high security. Hence, organizations are focusing on enhancing their software and services that assist companies with secure data sharing while undergoing business deals, thus providing a lucrative opportunity for market growth. Moreover, most large enterprises have secure solutions to prevent cyber-attacks or data breaches. The need to safeguard data and the rise in awareness of security events boost the growth of the virtual room data market across large enterprises.

Based on business functions, the global virtual data room market is bifurcated into finance, legal and compliance, sales and marketing, and workforce management.

The finance segment dominates the global market and is projected to exhibit a CAGR of 12.2% over the forecast period. Virtual data rooms, specially designed for the finance industry, provide merger and acquisition (M&A) teams with the right tools and software they need to close deals faster. Virtual data rooms assist the M&A finance teams with granting access to all financial data to authorized users stored electronically on the server. Data rooms are used for storing documents, sharing files, securing classified documents, and conducting financial transactions. M&A due diligence is currently the top use case for virtual data rooms. Furthermore, fundraisers need secure online spaces where financial information must be stored, sometimes for several weeks/months.

Based on Application, the global virtual data room market is bifurcated into Merger and Acquisition, Due Diligence, Fundraising, Audit Preparation, IP Management, Board/Investor Communications, Secure Document Repository, IPO, Others

Mergers and Acquisitions (M&A) is emerging as a significant and commonly used segment. M&A transactions are critical events in the corporate world, and VDRs are critical in allowing the transmission of sensitive information and due diligence processes during these transactions. Businesses, investment firms, and legal teams rely significantly on VDRs to securely communicate, evaluate, and manage private papers, allowing for a continuous and controlled flow of information between buyers and sellers. This application is distinguished by its importance and pervasiveness in today's corporate landscape, emphasizing the crucial role VDRs play in facilitating the seamless execution of mergers and acquisitions without relying on superlative terms.

Based on industry verticals, the global virtual data room market is bifurcated into BFSI, retail and e-commerce, energy and utilities, healthcare, IT and telecom, construction and real estate, and others.

The BFSI segment dominates the global market and is projected to exhibit a CAGR of 11.2% over the forecast period. Banking and financial institutions are adopting virtual data room solutions to secure customers' confidential information and minimize the risk of cyber-attacks. In addition, it helps banks and financial institutions fetch the relevant data of customers, which helps identify fraudulent activities and maximize customer transaction values. The rise in digital transformation in the BFSI sector has led to the generation of massive volumes of crucial data, providing a lucrative market opportunity. In addition, the increase in the adoption of VDR in the banking sector for helping clients expedite transactional processes and minimize the costs associated with running and maintaining physical data rooms adds a lot to the growth of the world market.

Recent Developments

• April 2023- Intralinks, a leading provider of virtual data rooms, announced that it had acquired DealRoom, a cloud-based due diligence software provider. The acquisition will allow Intralinks to offer its customers a more comprehensive suite of solutions.

• March 2023- DocuSign, a global leader in digital transaction management, announced that it had acquired VaultLogix, a virtual data room software provider. The acquisition will allow DocuSign to expand its secure document collaboration and transaction management solutions offering.