Term sheet is a roadmap for the proposed merger or acquisition. Term sheet guides the negotiation process by identifying key terms that need to be agreed upon between the parties. It acts as a blueprint to ensure both parties are on the same page before investing significant time and resources into the due diligence, negotiations and legal phases.
Negotiation of merger or acquisition generally involves complex and challenging processes due to which usually require, several round of discussions prior reaching consensus arrangement. In order to negotiate and navigate discussions between the prospective acquiring and target parties several revolving discussions around crucial aspects of the proposed merger or acquisition. For the aspects like due diligence, consideration and payment provisions, restrictive covenants, representations and warranties.
For negotiations perspective term sheet is extremely helpful crystallize the parties’ intentions and acceptable terms and conditions at high level.
In M&A transaction term sheet is primary document that contains the key terms of proposed transaction of merger or acquisition. During stage of negotiation and prior finalisation of the deal of merger or acquisition term sheet plays crucial role.
Term Sheet outlines the in principle agreed terms by parties in writing. It is foundation upon which the future, definitive and formal merger or acquisition agreement will be drafted and executed.
Term sheet acts as guide during early negotiation of proposed transaction, either merger or acquisition and it is base for the main and definitive agreement.
Term sheet ensures both parties are on same page priorspending substantial time and resources into the due diligence and legal phases.
Term sheet is guide to reach a joint beneficial agreement.
Prospective parties to the M& A transaction needs keep in mind balance between interests, of both the parties and reach collaborative and benefitable arrangements b between them.
From legal standpoint term sheet can be binding or non-binding upon depending upon the party’s intention and language used in the term sheet. Along with the facts and circumstances of the proposed transaction. Typically, across different industries prevailing practice is term sheet are non-binding except certain provisions like confidentiality, exclusive dealing during the negotiation period, governing law and dispute resolution.
