Key Elements of a Term Sheet

November 30, 2013 07:28 PM

Considering selling the operation to an unrelated third party?

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A term sheet will help:

  • Ask the right questions and position the answer.
  • Facilitate discussions in a constructive manner.
  • Detail the conditions of the deal as both parties agree.
  • Address the complex issues and generate definitive resolutions.
  • Finally, annotate the deal as an outline to draft legal agreements.

Since term sheets are non-binding, your notes don’t need to be in legal terms. When completed, a term sheet will contain summaries and specifications of a pending merger/acquisition. The document may start simple, listing the parties involved, compensation to be paid and the manner of payment.


Potential Buyer Name: ____________________________________ Date: _________________

Binding: Yes_____ No_____


Price: $_____________________

Form of payment: $_________ cash $_________ note/term $_________ retained ownership

Earnout: $_____________ per _______________ (period of time).

Legal structure: _________________________________________________________________ (based on input from respective accountants).

Escrow: $_____________________

Held by: ______________________

Period of time: _________________


Due Diligence:

Audit: ________________________________________________________________________

Inspection: ____________________________________________________________________

Regulatory approval: ____________________________________________________________

Financing: _____________________________________________________________________

Responsibility for Expenses:

Appraisal: _____________________________________________________________________

Employment/benefits during interim period: _________________________________________

Extra equipment: _______________________________________________________________

Workers comp: _________________________________________________________________

Other: ________________________________________________________________________


Period of time: ______________________ Acceptance period: ______________________

Terms and Conditions:

Given the activities necessary for continuing the operations of an agribusiness, the following terms and conditions may be included in the negotiation and contained on the term sheet:

Confidentiality (special conditions): _________________________________________________

Non-compete (both parties): ______________________________________________________

Non-disclosure (both parties): _____________________________________________________

Hold harmless (both parties): _____________________________________________________

No shop provision (both parties): __________________________________________________

Announcements (both parties): ____________________________________________________

Conditions precedent (extenuating circumstances): ____________________________________

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IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

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