Term Sheet Sample 1

Here is a de-identified sample Term Sheet (TS) that was received for a previous project, to give you a view of what these can look like.

Term Sheet Sample 1

It’s a bit misleading to provide a single sample, as TSs can very wildly. In this case, the company was relatively small and directly driven by the principal. (Note that the numbers have been randomised, so don’t read too much into them – this is more about the structure and format in general, than this specific deal.)

The TS is chatty, and is designed to be a step in the negotiation process – which it, in fact, turned out to be. This sort of deal will often include shares, earn-outs, incentives and other complex down-stream motivation packages. These are very difficult to negotiate sensibly, balancing the potential rewards of over-performance with the very real risks of under-performance.

In particular, it’s critical to keep in mind that the acquisition itself is going to be a big change to the organisation – even if everyone wants it to stay on a steady keel. While there may be big benefits in the merger of the two entities, there is likely to be a period of disruption over at least the first year, and this is almost certain to be reflected in the numbers – and hence in any payouts that depend on them.

In the end, we negotiated the terms considerably, and put together a deal that made everyone happy. And they all lived happily ever after…

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