So, a virtual data room provider offers an alternative to the physical data room involves the setting up of a virtual data room in the form of an extranet to which the bidders and their advisers are given access via the internet. An extranet is essentially an Internet site with limited controlled access, using a secure log-on supplied by the vendor, which can be disabled at any time, by the vendor if a bidder withdraws. Much of the information released is confidential and restrictions are applied to the viewer’s ability to release this to third parties (by means of forwarding, copying or printing). This can be effectively applied to protect the data using Digital Rights Management.
Therefore the due diligence meaning is used on financial transactions: The examination of a potential target for merger, acquisition, privatisation or similar corporate finance transaction normally by a buyer.
So a virtual data room is often used within a due diligence project.