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 offers an encrypted platform for exchanging confidential information with other parties. It streamlines complicated procedures and reduces legal risk.

However, implementing a virtual data room into your due diligence workflows requires careful planning and execution to ensure it’s successful. If you don’t, you could encounter common errors that can make the use of an ineffective data room.

The #1 error: Confusing click to read more File Names

To build a reliable data room the first step is to organize your files in a logical file structure. The top-level files should be clearly identified and reflect the nature of business or transaction. Within each of these folders, create subfolders that further separate documents based on their relevancy and their purpose. This will enable all parties to quickly access the data they require to accomplish their tasks.

Another blunder to avoid is giving inappropriate or excessive access privileges to non-authorized individuals. This can lead to accidental disclosure of sensitive information or hinder collaboration. To avoid this, it’s crucial to regularly check and update permissions for users to align with personnel changes or evolving project requirements.

Second Mistake: Inadequate Reporting

It’s important to have detailed and complete reports on the activity of your data room with a complete record of all files uploaded, how many users are able to access the room and what they are looking at. This will give you a glimpse into how your data room is functioning and allow you to pinpoint any possible bottlenecks.