29 September, 2023

Due diligence is a critical process in business transactions, such as mergers and acquisitions, investments, and partnerships. It involves thoroughly reviewing and verifying the information and documents related to the target company to assess its financial health, legal standing, and overall viability. In today's digital age, conducting due diligence has become more efficient and secure thanks to a virtual data room (VDR).

These online platforms provide a centralized and secure space for sharing and accessing sensitive documents and information used during due diligence.

Select the Right Virtual Data Room

Choosing the right VDR provider is paramount to the success of your due diligence process. Consider the following factors when selecting a virtual data room:

Security: Ensure that the virtual data room offers robust security features such as end-to-end encryption, robust access controls, and comprehensive audit trails.

User-Friendly Interface: A user-friendly platform will make it easier for all parties involved in the due diligence process to navigate and access documents. Consider your team members and realize that not everyone will be as tech-savvy as others.

data room

Collaboration Tools: Look for a virtual data room with collaboration features like commenting, annotation, and Q&A capabilities, which facilitate communication among team members.

Customized Branding: Some VDR providers allow you to embed your logo on every page of the virtual data room, and on the login page. In addition, some providers can create a custom url (like "your-company.dataroom.net") for your login page.

Customer Support: Ensure that the VDR provider offers responsive 24/7 customer support to address any technical issues or questions that may arise during the process.

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Organize Documents Effectively

Before uploading documents to the virtual data room, organize them systematically. This includes categorizing documents by type (financial, legal, operational, etc.) and creating clear folder structures. An organized VDR will save time and reduce confusion during due diligence. Some VDR platforms provide due diligence checklists making it easy to ensure your due diligence documents are complete.

Set Access Permissions Carefully

Not all participants in the due diligence process should have access to all documents. Administrators should control access by assigning permissions based on roles and responsibilities. For example, financial documents may only be accessible to financial analysts, while legal documents should be restricted to legal teams. Regularly review and update access permissions as the due diligence process progresses.

Use Search Functionality and Smart Filters

A virtual data room with robust search functionality and smart filters are invaluable during due diligence. These tools enable users to quickly locate specific documents or information, reducing the time spent searching through extensive document sets. Look for a platform where search results are sorted by relevance, with synopses and hit highlighting showing how the searched keyword(s) are used in context.

The search engine should also provide capabilities such as "stemming" (for example, searching for "finance" will find "financing", "financials" and "financially"). It should also be possible to search for international character sets (such as Chinese, Japanese, Cyrillic, etc.).

Smart filters allow users to instantly filter documents based on a variety of filtering criteria, including:

  • Recent — Only display documents that were published since the last login, or in the last day, week, month or quarter
  • Read / Unread — Only display documents that have been read, or that have not yet been read
  • Published By — Only display documents that have been published by a specific user or group
  • File type — Only display documents of specific file type(s) (such as xlsx, docx, pdf, etc.)
  • Viewable By — Only display documents that are permissioned for viewing by specific user(s) or group(s)
  • Viewed By — Only display documents have been viewed by specific user(s) or group(s)

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Track and Monitor User Activity

Utilize the VDR's auditing and tracking features to monitor user activity within the platform. This includes tracking who accessed which documents, when, and for how long.

A virtual data room with a detailed activity list will provide a comprehensive audit trail that includes every user login, agreement click through, video watched or document viewed, printed or downloaded, with comprehensive specificity allowing administrators to trace the chronology of activities by user and gain insights into their interest level and what they care about.

Establish a Clear Communication Channel

data room communication

Due diligence often involves multiple parties working together, including legal teams, financial analysts, and executives. Establish a clear communication channel within the virtual data room to facilitate discussions, ask questions, and provide updates. This prevents misunderstandings and keeps everyone on the same page.

Prepare for Q&A Sessions

A virtual data room should include a Q&A module where participants can ask questions about documents and receive answers from the relevant parties. Prepare in advance for Q&A sessions by designating team members responsible for responding to inquiries promptly and accurately.

Regularly Back Up Data

Data loss can be catastrophic during due diligence. Regularly back up all data within the virtual data room to prevent the loss of critical information due to technical issues or accidental deletions.

Conduct Training Sessions

Ensure that all participants in the due diligence process are familiar with the virtual data room's features and functionality. Conduct training sessions to help them make the most of the platform, minimizing errors and delays.


Virtual data rooms have revolutionized the due diligence process by offering secure and efficient ways to share and access sensitive information. By following these best practices, you can streamline the due diligence process, enhance security, and improve collaboration among stakeholders.

Choosing the right virtual data room provider and maintaining a well-organized and secure environment will help your team navigate the complexities of due diligence with confidence.

ShareVault has been providing organizations of all types and sizes with secure document sharing solutions for over 15 years.

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