Virtual data rooms (VDRs) have fundamentally changed the way confidential documents are handled in M&A. They make it possible to provide large volumes of data in a secure, structured and location-independent manner - including granular user rights, logging and communication functions. While processes are accelerating and data volumes are growing, expectations of stability, usability and, above all, security are also increasing. The technology through which sensitive information is exchanged is increasingly becoming the critical backbone of every transaction.
Increasing data volumes - growing responsibility
As the speed of M&A processes increases, so do the demands on digital platforms. Many VDR providers are responding with comprehensive function packages, fast deployment times and the first AI-supported tools. However, where convenience and speed dominate, there is a risk: confidential financial data, IP-sensitive information and personal content require maximum control. If security incidents occur, not only do processes come to a standstill - liability and reputational risks are also the result.
Security issues are often underestimated
In practice, it is clear that the urgency of rapid provision often supersedes consideration of the legal framework. Particularly in the case of international transactions, the question arises as to the jurisdiction under which data is stored and processed. This is precisely where the concept of data sovereignty gains relevance - the ability to fully control the storage location, access rights and technical infrastructure.
Even with European hosting, there is a risk if the provider is part of a non-European group. US providers such as Microsoft or Amazon, for example, are subject to the CLOUD Act and can be obliged to hand over European data - with potential consequences for compliance and protection of trust.
Data sovereignty as a selection criterion for VDR providers
Despite its importance, data sovereignty is often only given secondary importance in the M&A environment. Yet it should be a key criterion when selecting a virtual data room, especially for sensitive or regulated transactions. A data-sovereign VDR ensures that:
- Hosting takes place exclusively in Germany or the EU (contractually secured, e.g. via AVV),
- there are no group structures in third countries,
- technical access options of the provider are excluded or strictly limited,
- compliance and legal relationships are documented in a comprehensible manner,
- a comprehensive security and support concept is available.
Such requirements are becoming increasingly important not only for sellers, but also in dialog with buyers - especially in cross-border transactions under European data protection law.
Practical recommendations for selecting a VDR
M&A teams today should not evaluate data rooms solely on the basis of price or user convenience. Important test criteria are:
- Hosting in certified EU data centers with clear data protection requirements
- Existing security certificates such as ISO 27001, BSI C5, SOC 2 or ISO 22301
- German support and personal availability
- Many years of market experience and references
- Transparent documentation of the security architecture
These aspects belong in the early planning phase of a transaction - not just in the implementation phase.
Conclusion: Data sovereignty as an expression of responsibility
Today, virtual data rooms are indispensable for professional M&A processes. At the same time, they are no longer just an infrastructure issue, but a strategic factor. Those who value control not only protect confidential information, but also increase the resilience of the entire deal flow. Data sovereignty is therefore not a technical detail - but a quality feature of corporate responsibility.
This is a guest article by Moritz Ober, Customer Success Manager at netfiles GmbH.
