Term Sheet

A Term Sheet is used to start negotiations by allowing the parties to focus on the key terms of the transaction. Its primary objective is to enable each party to focus on the key elements of the transaction before preparing a detailed letter of intent (LOI) or purchase agreement. The Term Sheet is a short bullet list of the key points of the transaction.

We have seen many parties spend dozens of hours and thousands of dollars in attorney fees before they have agreed on the basic terms and structure of the deal. The Term Sheet can be as simple as a sheet of paper with your agreement regarding the basic terms.

Here are the essential terms of the deal:

  • Selling price
  • Earnest money deposit, if applicable (corporate buyers don’t usually provide an earnest money deposit)
  • Down payment
  • Holdback, if applicable
  • Exclusivity, if applicable
  • Seller note — amortization period, interest rate
  • Due diligence length
  • Training length
  • Non-compete agreement
  • Any contingencies