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Best Practices for Data Rooms and Secure Document Sharing

In any business process, there comes a point when both parties need to share information for a variety of reasons. For example, to gauge interest and determine value. Data sharing usually occurs during the due diligence virtual data room process, but can occur before or after, depending on the type of transaction. To facilitate the process, companies create data rooms where stakeholders have access to the most valuable corporate information.

Digital data rooms have revolutionized the way companies approach transactions. By digitizing most processes, companies began to focus on more important aspects and differentiate their priorities.

Security Comes First

The most important aspect of a data room review is its security, so that corporate secrets don’t get to competitors or other unscrupulous organizations.

Companies used to literally take paper files into a separate room and let inspectors in one by one to make sure nothing was stolen. Today we have virtual vaults that can be accessed over the Internet. Nevertheless, security, privacy, and tracking who was looking at what is still a priority.

Using Data Rooms for Secure File Sharing

When business users need to quickly share files or documents, they often turn to consumer file sharing platforms that do not meet corporate security and compliance requirements.

Today’s business users need an easy and convenient way to securely share files in their business environment that allows them to have seamless access to their files across all devices and collaborate with colleagues, customers and partners even beyond the corporate firewall.

Consumer-grade file synchronization and sharing solutions, such as Dropbox, are convenient options for many users and generally work as intended. However, recent security breaches in such file-sharing services result in breaches of privacy or the inability to find data when it is needed. Such insecure file-sharing services lack tools for monitoring, tracking, auditing, and other important file-sharing features.

Virtual Data Room as a Best Practice


Virtual Data Room provides an enterprise-level alternative to email, creating an end-to-end secure cloud infrastructure that is fully under corporate control.

Virtual Data Room balances the need for simplicity for the end user with the security, control and flexibility required by the enterprise to protect critical organizational information and data.

Virtual Data Room reduces organizations’ reliance on potentially insecure email attachments.

Enterprise file sharing allows users to upload and share documents, photos, videos and files using a variety of devices such as smartphones, tablets.

The virtual data room solution allows businesses and service providers to set up file sharing and synchronization services for their users, creating complete workforce independence so the team can work from anywhere and from any device. Secure access to files in the virtual data room, when needed, increases productivity and improves collaboration between teams. 

The Benefits of a Virtual Data Room 

The benefits of secure file sharing through the virtual data room include:

  • An alternative to FTP for transferring large files
  • Secure file access for users
  • Synchronization between devices
  • Synchronization between sites and offices
  • Collaborative team workspace
  • Easy service to learn, easy to use 

Data Room Structure

Data rooms come in all possible shapes and sizes, even in terms of software. Moreover, best virtual data room providers usually allow users to choose their preferred data room structure depending on their case or industry, or even create their own layouts.

A well-designed electronic data room structure is important because it ultimately determines the order in which tasks are processed and prioritized. The most important task in creating a virtual data room is to visualize the expected workflow and how best to accommodate it. Here are three examples:

  • By Stage of Deal

Mergers and acquisitions (M&A) are one of the most common uses of online data rooms software. Every M&A transaction, regardless of industry or company size, goes through certain stages that require specific expertise.


  • Preparation

The selling party gathers the necessary confidential documents and outlines the most desirable outcome of the transaction. The data room at this stage works as a document repository and platform for strategy development.


  • Due Diligence

Representatives from the buying party and other outside parties review documents, request additional information, and communicate with the selling party to make an informed decision. Data room administrators separate different categories of documents to present to authorized parties as needed.


  • Post-closing integration

After the deal closes, both parties collaborate in the data room software to help everyone get comfortable transitioning and setting up new workflows. The virtual data space serves as a communication platform and confidential data repository for new management. 

  • By Project

Investment bankers review and process multiple transactions simultaneously. A secure data room with a single sign-on function allows all projects to be observed and managed individually without risk of interference.

Similarly, a company can open a data room to equip a smaller project within a larger deal, such as administering the due diligence process, developing a product or structuring a new business unit.

  • For Teams

Teams can also use virtual data rooms to share documents between departments, collaborate internally, hold meetings, etc. For example, if the HR department wants to increase the security of sensitive documents such as employee contracts and contact information, they can upload digital copies to an online repository and manage the flow of files.

The same structure logic applies to data rooms for board member communication. Board members can store and manage confidential documents, hold meetings and develop agendas in the data room without compromising data privacy or making unnecessary changes to their schedules.

Options for Using Virtual Data Rooms

There are an almost unlimited number of ways to use virtual data rooms. However, due to the nature of confidential documents and high stakes transactions, a few use scenarios stand out. 


  • M&A

Mergers and acquisitions require maximum data security and convenient collaboration among multiple parties, both of which can be achieved with an advanced data tool.


  • Due Diligence

The sheer volume of publicly available and confidential documents makes due diligence a complex and time-consuming task. Data rooms with universal file support and multiple levels of access rights greatly simplify these procedures.


  • Collaboration

Professionals can communicate and join forces in data rooms during internal day-to-day operations, mergers and strategic partnerships.


  • Processing an Initial Public Offering (IPO)

Going public is a complex operation that requires the expertise of various external parties and must comply with strict rules. Data rooms greatly expedite this process by organizing and complying with vendor requirements.


  • Fundraising

Fundraisers use data rooms to reach out to potential investors, collaborate with marketing professionals and run their operations. 


  • Portfolio Management

Investment bankers, private equity firms, real estate agencies and many others turn to virtual data room providers to store documents, find opportunities and develop strategy.


  • Restructuring

Whether a company needs to reallocate capital or change internal operations within the organization, restructuring involves the cooperation of several parties and the review of confidential documents.


  • Bankruptcy 

Data rooms help reduce stress at critical times by providing easy application management, protecting sensitive data from unauthorized viewing and facilitating an intuitive workflow.

In this way, Data Rooms provide reliable storage and transfer of files. But moreover, thanks to the functionality and convenient structure of the service, there are many opportunities for the effective use of data rooms in the business sector.


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By Susan Barlow

Dr. Susan Barlow is retired from academia after teaching business administration, project management, and business writing courses for over 20 years.

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