The most common mistakes when using virtual data rooms and how to avoid them

Virtual data rooms are an integral part of modern investment processes. They allow you to securely share documentation in mergers and acquisitions (M&A), due diligence, IPOs, debt financing and real estate transactions. Although the technology significantly streamlines work, improper implementation or lack of experience can lead to costly mistakes and even ruin a transaction.

Don't make these mistakes when managing a project in VDR

Below, we discuss the most common problems encountered when working with VDR and suggest how to avoid them effectively.

1. Lack of adequate preparation of project documentation for VDR

Problem description:

One of the most common mistakes is adding files to VDR too hastily or chaotically. Documents are disorganised, have inconsistent names, lack versioning, or are out of date.

Consequences:

• Information chaos and difficulties in navigating the VDR

• Reduced credibility of the company in the eyes of investors

• Risk of overlooking key data during due diligence

  
  

How to avoid it:

• Prepare a folder structure (preferably based on the DD checklist)

• Use consistent file naming (e.g. ‘01_Finance_2024_Q1.xlsx’)

• Implement an internal document review before they are sent to the VDR

• Mark draft and final versions. Avoid duplication of data

2. Access rights to the VDR that are too broad or incorrect

Problem description:

Sometimes, all users are granted the same permissions or access is granted without precise control. An example would be an investor from a competing company who gains access to sensitive operational information.

Consequences:

• Risk of confidential data leakage

• Breach of GDPR or NDA

• No control over who has viewed specific documents

  
  

How to avoid it:

• Use role and user group mechanisms (e.g. management, advisors, investors)

• Grant access on a need-to-know basis

• Regularly audit access – activity logs will show who saw what and when

• Choose a VDR with temporary or conditional access (e.g. only after signing an NDA)

3. Neglecting password security and authentication

Problem description:

Users often do not change default passwords, use the same data for multiple services, or do not activate available security features.

Consequences:

• Increased risk of unauthorised access

• Possibility of financial, personal or legal data breaches

• Breach of compliance rules and corporate policies

  
  

How to avoid it:

• Enforce strong passwords and require them to be changed regularly

• Activate 2FA or MFA (Multi-Factor Authentication) – especially for users with access to key data

• Use SSO (Single Sign-On) if the VDR allows it

• Regularly review inactive accounts and delete them during the project

4. No monitoring of user activity

Problem description:

Administrators do not use the analytical tools available in the VDR. There is no information about who viewed which documents, how much time they spent on them, or which files were downloaded.

Consequences:

• Lack of transparency and lost opportunity to verify interest in the offer

• Difficulties in identifying potential red flags on the investor's side

• Possibility of unnoticed data leakage

  
  

How to avoid it:

• Regularly analyse heat maps, log reports and browsing statistics

• Determine which areas are of most interest to investors (e.g. HR, IP agreements, patents)

• Respond to unusual behaviour, such as mass downloads of documents by a single user

5. Inconsistent communication within the VDR

Problem description:

Users publish unverified comments, send confidential questions to the wrong people, or publish draft contracts at inappropriate times.

Consequences:

• Misunderstandings and potential legal risks

• Lack of control over versioning and approval of information

• Weakening of trust between parties

  
  

How to avoid it:

• Develop clear communication rules for all parties

• Use the Q&A modules available in VDR – they centralise questions and answers

• Mark documents as ‘Draft / For approval’

• Introduce a publication approval system (e.g. review before publication)

What else is worth noting?

• Take care of team onboarding – even the best VDR won't help if users don't know how to use it

• Choose VDR solutions with local support and a transparent security policy.

• After closing the project, don't forget to revoke access and archive project data

Summary

Virtual data rooms are not just an IT tool today, but also a foundation for building trust in a transaction. A professional approach to their use – based on structure, security and analysis – increases the chances of success for the entire process.

By avoiding the mistakes described above, you can not only speed up the transaction, but also improve your organisation's image in the eyes of investors and advisors.

Want to avoid mistakes and conduct due diligence like a pro? Contact the DealDone team – we will advise you, configure the system and guide you through every stage of effective use of the SECUDO Virtual Data Room.

About us

Secudo Solutions is a specialised company offering high quality information and data security products. We offer digitisation services and software in the field of modern technologies for the circulation of confidential information, classified information, sensitive data and the digitisation, security, encryption and sharing of data and documents inside and outside the organisation.

For more than 10 years, Secudo Solutions has specialised in providing solutions related to the digitisation, archiving and sharing of documents in the form of Document Management System (DMS) or Virtual Data Room (VDR). The company has independently developed and marketed the SECUDO VDR system. VDR SECUDO is a platform for secure digitisation, archiving, sharing and processing of corporate documents and data offered in the cloud, in a Software-as-a-service model, for business customers.