1. Gather and structure documents
It’s important to identify all the necessary documents and analyze how to organize them by categories and topics and designate restricted folders. It’s worth creating a plan for your virtual data room. Consider the following questions:
- What documents will be required during the due diligence process?
- How much capacity will you need to store all of your sensitive documents in the VDR?
- How many users are expected to work within the data room?
You need to break down the process into smaller, more manageable tasks and create a checklist. It will make uploading files to the data room much easier, and there will be less chance of forgetting something important during folder organization.
2. Assign administrators
Here you need to focus on admin responsibilities. It usually includes setting document access, creating and managing folders, inviting users, and maintaining the VDR. There should be a balance when providing access to the virtual data room, as inviting more users leads to more transparency and advanced communication.
It’s recommended to assign at least two administrators to monitor all activity within the M&A data room. It will also help to speed up the preparation process of the M&A data room.
3. Upload all documents
You need to upload all relevant files which are going to be used during the deal lifecycle. It’s also important to keep all documents updated regularly. Outdated documents are not valuable during the M&A process — some financial documents may be the only exception.
Also, you should regularly check whether documents in the data room are still relevant and useful to avoid wasting storage capacity. Storage space can get expensive, so make sure you use it efficiently.
Don’t forget to remove unnecessary files from your folders, such as thumbnail caches and temporary office files. There are also several common ways to upload documents to the data room, including:
- Direct uploads. The admins manually upload all files to the data room.
- Syncing local folders. The user that uploads files can organize the folder structure from a local storage device and then sync the content with the virtual data room.
- Delegating uploads. All files uploaded to the data room go into a preparation folder where an administrator can review and approve them.
4. Invite other authorized users
When it comes to inviting other users to your M&A data room, security is the top concern throughout the deal process. Virtual data room vendors provide a wide variety of security features, such as two-step authentication, advanced encryption, digital watermarking, user access permissions, and activity tracking.
When you invite new users to your virtual data room, consider the following questions:
- Which documents should I restrict access to?
- Which users should have the authorization to edit files?
- Is it possible to track user activity within the virtual data room?
- Do I need an NDA for new users?
After answering these questions, you can decide what to share with potential buyers and other parties involved. Keep in mind that involving too many people in a deal increases the chances of a data breach. You should only give essential people access to your VDR. Furthermore, administrators should continually track the room’s user activity to help avoid leaks.
5. Continue maintaining data room
Now that you have everything set up, remember to keep up with your data room’s maintenance. Always keep documents up-to-date, manage comments and questions in the Q&A section, and manage user permissions and groups. The admins should also review user activity to better understand which files are the most interesting to potential buyers or investors.