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A term sheet (also known as a list of conditions) is a negotiation document in which you outline the key conditions of an investment or acquisition. It is usually largely non-binding, but proper drafting is crucial — and some provisions are indeed binding.
What is a term sheet?
A term sheet summarizes the key agreements of a proposed transaction, for example in the case of an investment or a business acquisition: the valuation, the amount, the stake, control, and the key conditions. It serves as a guideline for further negotiations and the final contracts.
No obligation, but not entirely
Most provisions in a term sheet are not binding: they indicate the direction on which the parties agree, pending final documents. However, certain parts often are binding, such as confidentiality, exclusivity, and a cost arrangement. Make it clear in the text what is and is not binding.
Why is good editing important?
An unclear term sheet leads to discussion in the next phase or unintentionally creates the impression that a binding agreement has already been reached. By precisely stating what has been agreed upon and what its status is, you avoid surprises and maintain control over the negotiation.
Term sheet, LOI or letter of intent
The term sheet resembles a letter of intent. The names are used interchangeably, but the core is the same: defining the key points and their status in advance. Have the document drafted or reviewed before you sign.
Frequently Asked Questions
Is a term sheet binding?
Usually largely not, but elements like confidentiality and exclusivity often are. Clarify the status of each point.
What do I use a term sheet for?
To establish the main outlines of an investment or acquisition as a basis for further negotiations and contracts.
What is the difference compared to a letter of intent?
In practice, very little: both determine the key points and their status in advance.
Have a term sheet drafted?
Our legal experts draft a letter of intent . View our corporate / M&Ateam or schedule a free consultation.
