A term sheet outlines the general terms on an agreement to purchase equity or assets of a company.
- Clarifying the terms of an agreement to purchase business equity or assets in a non-binding document
- Providing documentation of the terms of a tentative offer on business equity or assets.
Depending on the nature of the exchange, the purchase or sale of a company or its assets can involve complex negotiations over multiple transactions. Often, parties to a negotiation find it useful to sum up the terms of a business deal that all parties wish to move forward using a term sheet. A term sheet spells out the terms of a potentially complex exchange using simple, non-binding language. Rather than a lengthy articulation of terms and conditions, the term sheet provides a brief overview of what the parties have generally agreed to with respect to a purchase of a business or its assets.
A term sheet does not bind the parties to its terms, but many investors require a term sheet before making a formal offer so that they can perform due diligence on the investment.A term sheet can also be helpful in securing financing for a personal or business venture, as term sheets can be shopped around to several different potential investors.
Typically, once a term sheet has been executed, counsel for all parties begin to draft a final agreement. So, although the term sheet itself is not legally binding on the parties, the final agreement must comply with the terms and conditions agreed to by the parties. Because the term sheet forms the foundation for a legal agreement, it is critical for this document to be precise and well-organized. Use this interactive form to create a term sheet that fits your business needs.