Common Data Room Mistakes

When you’re planning to conduct M&A or capital raising, IPO, divestiture or any other due diligence transaction, the virtual data room is a secure way to exchange confidential information with other parties. It makes complicated procedures easier and reduces the risk of legal liability.

However, implementing a virtual data room into your due diligence workflows requires careful planning and execution to ensure it’s successful. Without this, you may run into common mistakes that make using the data room in a suboptimal way.

Mistake #1: Confusing file names

To set up a successful data room, the first step is to organize your files into a coherent file structure. The top-level folders need to be clearly identified and reflect the type of business or transaction. Within each of these folders, you can create subfolders to further divide documents based on their relevancy and function. This will ensure that everyone can quickly find the information they require to complete their tasks.

Another mistake to avoid is granting inappropriate or excessive access privileges to unauthorized individuals. This could result in risk of exposing sensitive information or hinder collaboration. To avoid this, it’s important to regularly audit and update user permissions to keep up with changes in personnel or the changing requirements of the project.

The second error: inadequate reporting

It is essential to have a comprehensive and precise reports on the activities in your data room, including a list of all uploaded files, the users are accessing and what they’re studying. This will enable you to examine how your data space is working, and help you identify any possible bottlenecks.

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