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 streamlines complicated procedures and reduces legal risk.

However, integrating the concept of a virtual data space into your due diligence workflows requires careful planning and execution to ensure that it’s successful. Without this, you may run into common mistakes that render the use of an ineffective data room.

Mistake #1: Confusing File Names

The first step to create an effective data room is to organize files into a logical folder structure that is clearly labeled top-level files that reflect the transaction or business. Within each of these folders, create subfolders that further categorize documents based on their importance and function. This will allow all stakeholders to quickly access the data they need to complete their tasks.

Another blunder to avoid is giving inappropriate or excessive access rights to unauthorised individuals. This could result in accidental disclosure of sensitive information or impede collaboration. To avoid this, it is important to regularly update and audit user permissions in order to keep them in line with changes in project or person requirements.

Second Mistake: Inadequate Reporting

It is essential to have a thorough and complete reports about the activity in your data room and activity, which includes a complete listing of all files uploaded, which users access the room and what they are browsing. This will help you assess how your data room is doing, and pinpoint any potential bottlenecks.

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