Nov 28 ‘25
27 min read
Mergers and acquisitions (M&As) are complex transactions associated with significant risks:
- Lack of due diligence
- Overpayment
- Miscalculating synergies
- Seamless integration issues
During mergers and acquisitions, dealmakers share considerable amounts of confidential information.
The M&A documents checklist entails customer lists, employment contracts, financial data, and intellectual property. This implies that the exchange of private and sensitive data requires a secure file-sharing environment.
Even a single data breach may terminate the contract, harm one’s reputation, or cause legal and financial repercussions.
Dealmakers and third-party consultants, private equity teams, legal advisors, investment banking representatives, corporate development teams, and SaaS founders interested in a sale, who participate in M&A deal structures, express common pain points:
- Fear of data leaks in M&A
- Inefficient or insecure email/file sharing
- Confusion over which tools are compliant and secure
- Risk of version control issues
- Difficulty with detailed tracking access and permissions
Here are our in-depth insights into secure file sharing during M&A.
What is secure file sharing in the M&A context?
Sending an email with an attachment is not a safe approach to convey data in M&A transactions.
M&A negotiation tactics are deeper than that. M&A dealmakers need a proper virtual environment to share, view, and manage data in the safest and most controlled way possible.
Secure file sharing in M&A deals requires a protected virtual data room platform capable of storing vast amounts of information available to authorized parties only.
A virtual data room is a safe, centralized location that stores all the data on M&A transactions and lowers the risk of data breaches owing to data loss prevention.
Here’s how you can securely share M&A due diligence documents.
VDR vs. Email vs. Cloud Storage
| Feature | Virtual Data Room (VDR) | Cloud Storage | |
| Security | Highest. End-to-end encryption, multi-factor authentication, dynamic watermarking, and granular access controls. | Standard. Encryption in transit and at rest, basic user permissions. | Low. Often unencrypted, vulnerable to breaches, and no control once sent. |
| User Access Control | Highly granular. Control access on a per-document, per-user, and even per-page basis. | Basic. Permissions are typically limited to viewing, commenting, or editing. | None. Anyone with access to the recipient’s inbox can view or forward the attachment. |
| Audit Trails | Comprehensive. Detailed logs of every user action, including document views, downloads, and prints. | Limited. It may offer some activity tracking, but lacks the detail of a VDR. | None. No record of who viewed or downloaded an attachment. |
| Collaboration | Built-in Q&A, commenting, and secure communication channels. | Real-time co-authoring, commenting, and file syncing. | Limited to forwarding and replying to messages. |
| Use Case | M&A, due diligence process, legal proceedings, fundraising, and board communications. | Daily business operations, team projects, secure file storage, and syncing files across devices. | Quick, non-confidential communication and informal file sharing. |
| Cost | Expensive. Priced for specific, high-value transactions. | Affordable. Often has free tiers for personal use and scalable business plans. | Free with most services. |
Key challenges in sharing M&A files securely
Fear of data leaks: The greatest fear is that someone will use sensitive data without permission. An authorized person may send or receive an email containing confidential attachments that end up in the wrong hands.
Lack of comprehension of which tools are safe and legal: There are so many sites for exchanging files that transaction teams struggle to identify those that meet the advanced security features and regulatory compliance criteria (SOC 2, GDPR, or HIPAA) and other relevant regulations needed for an M&A deal.
Problems with version control: When multiple stakeholders work on shared files at the same time, it becomes difficult to identify the most recent version if the system goes down.
Unidentified user roles. It’s hard to tell who has seen, downloaded, or changed a document versioning without a centralized system. It could be impossible to hold people accountable due to the lack of openness.
Must-have features for secure M&A file sharing
To ensure secure M&A file transfer, M&A transaction teams should search for a secure file-sharing platform with a set of proper features and functionalities to provide M&A deal stakeholders with control, openness, and a seamless user experience during the purchase process
| Feature | Description |
| Granular permissions | M&A virtual data room admins specify who may view, edit, print, or download specific files. This security measure will keep private financial information from being seen by unauthorized third parties. End-to-end data encryption means that all data, whether sent or stored, is safeguarded by robust encryption standards: AES-256 and SSL/TLS. |
| Activity logs and audit trails | It’s essential to have a complete record of all platform activity. This shows who read each document and when they viewed it, as well as their further actions. Audit trails monitor user activity and make all authorized VDR participants accountable for their actions. |
| Built-in Q&A | The built-in Q&A module makes it simple for everyone to communicate in a safe and organised manner and answer questions regarding due diligence materials. |
| Controls for printing and adding watermarks | Adding a dynamic watermark to documents, such as “Confidential – Not for Distribution”, and managing print rights complicates unauthorized sharing. |
| Version control: | A secure M&A VDR platform should keep track of all the different versions of a document so that everyone is always using the most up-to-date information. |
| Multi-factor authentication | To prevent unauthorized logins, two-factor authentication (2FA) adds an extra layer of verification, such as a code sent to the user’s mobile device. |
Solutions for secure file sharing in M&A
Virtual Data Rooms (VDRs): The Gold Standard
Virtual data rooms are proven locations to store M&A data and conduct M&A agreements. They are used for crucial meetings and provide M&A stakeholders with a safe, centralized, and well-monitored space to complete their research, discuss their findings, and finalize the deal.
Unlike physical data rooms and conventional file-sharing systems, VDRs are designed from the bottom up to meet the custom requirements of M&A dealmakers.
Top VDR platforms customised for M&A purposes include essential and advanced features like AI-powered document analysis and strong reporting.
For years, reputable companies have relied on proven VDR platforms such as Ideals, Intralinks, and Datasite to make informed decisions during complex private transactions.
M&A process timeline: How secure sharing supports each M&A phase
1. Pre-Marketing / Deal Preparation
- Secure Document Collection: The seller’s team uses the VDR to gather and organize all necessary documents, such as financial statements, legal contracts, and intellectual property records.
- Access Control Setup: Admins set up granular permissions to ensure only the core internal team (authorized personnel) can access and prepare the documents.
- Redaction: Sensitive information is redacted before the documents are made available to potential buyers.
2. Due Diligence
- Controlled Access for Buyers: The VDR provides controlled, secure access for all parties (e.g., potential buyers, lawyers, and accountants) with different permission levels based on their role (role-based permissions).
- Q&A Module: Buyers can ask questions directly within the platform, and the seller can respond, creating a documented audit trail.
- Activity Tracking: The seller can monitor which documents are being viewed and for how long, providing valuable insights into a buyer’s level of interest.
- Dynamic Watermarking: Documents are protected with watermarks to prevent leaks.
3. Negotiation and Closing
- Secure Document Sharing: The VDR is used to share and collaborate on final legal agreements, such as the purchase agreement.
- E-Signature Integration: Digital signatures can be collected securely within the platform, streamlining the closing process.
- Audit Trail: All negotiation and final document changes are logged and tracked.
4. Post-Merger Integration
- Secure Archiving: Once the deal is complete, the VDR acts as a secure, searchable archive for all transaction documents, providing a single source of truth for future reference and M&A compliance.
- Access Revocation: Permissions for external parties are revoked to ensure continual data protection.
Other Secure File Sharing Platforms
You may alternatively deploy secure file-sharing services that aren’t VDRs for smaller or earlier-stage deals, but they must be set up in a manner that fulfils deal data security in M&A.
Most secure file sharing solutions include advanced security measures, even if they lack specific VDR capabilities:
Box is known for its enterprise-level security and secure collaboration tools. Box offers robust file access control and compliance certifications. It can be configured to manage M&A documents, but it lacks some of the deal-specific features of a VDR.
Citrix ShareFile lets you securely share files and work together. It has features such as audit trails and client portals. It’s an excellent solution for businesses that provide professional services, but a big merger or acquisition could require additional adjustments to make it work.
Onehub: The goal of Onehub is to make it easy and safe for individuals to collaborate. It offers features such as activity monitoring and customizable permissions based on user roles and actions. You can use it for due diligence, but it doesn’t have as many functions for M&A as a dedicated VDR.
Standard Dropbox is not as good as the Dropbox for Business version. It gives teams access to files, provides administrators with management and audit tools. Nonetheless, it lacks all the security and deal-specific features like VDRs.
Key takeaways
M&A pain points are primarily driven by the fear of data leaks and the challenges of securely sharing sensitive information.
Using generic technology puts much sensitive information at risk and might even cause the firm to collapse. You won’t be able to finish a successful M&A deal if you can’t communicate data securely.
Relying on insecure methods like email for sharing sensitive files can lead to significant security risks. These methods cannot track access and permissions and are prone to version control issues, causing confusion and increasing the risk of unauthorized access.
VDR platforms provide encryption to ensure all data remains protected, both in transit and while being stored securely. They allow for secure cloud sharing, ensuring only authorized users can access crucial documents.
By implementing VDR solutions for M&As, dealmakers effectively manage the risks associated with data sharing and protect their most valuable assets throughout the M&A process.
A virtual data room is an ideal solution to ensure compliance and cope with the complex parts of M&A due diligence. Time-tested VDR platforms provide M&A dealmakers with sufficient knowledge for efficient deal closing.
FAQ
Using a secure virtual data room (VDR) is the safest option owing to special permissions, end-to-end encryption, and audit trails to make sure that documents are delivered safely and privately.
Google Drive has enhanced security measures, but it wasn't designed particularly for M&A due diligence. It lacks the robust security features and access controls of a VDR, and it doesn't offer M&A-specific capabilities like asking questions or viewing detailed activity logs.
The business edition of Dropbox is safer than the personal version. It has certain logs for audits and controls for system admins. But it doesn't offer the same level of security, full rights, or special deal features as a virtual deal room does.
If a document gets out during an M&A conversation, it might be a disaster. It may not happen, which would waste time and money. It might also ruin your reputation, cost you a lot of money, and result in a lawsuit. Leaks may hurt a company's competitive edge, expose trade secrets, and break non-disclosure agreements.