A Term Sheet For Sale of Business is a crucial preliminary document in Canadian M&A transactions that bridges initial discussions and final binding agreements. It is typically used after preliminary due diligence but before detailed investigations and definitive documentation. The document captures key commercial terms agreed upon by parties, including transaction structure, purchase price, payment mechanisms, and crucial conditions. While predominantly non-binding, certain provisions like confidentiality and exclusivity are usually binding. The term sheet's primary purpose is to ensure parties have a clear understanding of fundamental deal terms before investing significant resources in detailed due diligence and complex legal documentation. In the Canadian context, it must consider federal and provincial requirements, particularly for regulated industries or when foreign investment is involved.
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1. Parties: Identification of the seller(s) and buyer(s), including full legal names and jurisdiction of incorporation
2. Background: Brief description of the business being sold and the purpose of the transaction
3. Definitions: Key terms used throughout the term sheet
4. Transaction Structure: Whether the transaction is an asset sale or share sale, and basic structure of the deal
5. Purchase Price: Total consideration, payment terms, and any purchase price adjustments
6. Payment Terms: Timing and method of payment, including any deferred payments or earnouts
7. Key Assets/Shares: Description of the main assets or shares being transferred
8. Closing Conditions: Key conditions that must be met before the transaction can close
9. Due Diligence: Overview of the due diligence process and timeline
10. Exclusivity: Period during which the seller cannot negotiate with other potential buyers
11. Confidentiality: Basic confidentiality obligations of the parties
12. Timeline: Key dates and milestones for the transaction
13. Governing Law: Jurisdiction governing the term sheet and subsequent agreements
1. Employee Matters: Include when there are significant employment considerations or key employees to be retained
2. Intellectual Property: Include when IP assets are a material part of the transaction
3. Real Estate: Include when real property assets are significant to the deal
4. Environmental Matters: Include for businesses with environmental risks or compliance requirements
5. Regulatory Approvals: Include when specific regulatory approvals are required
6. Non-Competition: Include when restrictions on seller's future activities are important
7. Financing Contingency: Include when buyer requires financing to complete the transaction
8. Tax Structure: Include when specific tax considerations need to be addressed
9. Transition Services: Include when post-closing services from seller are required
1. Purchase Price Calculation: Detailed breakdown of purchase price components and adjustments
2. Key Assets Schedule: List of material assets included in the transaction
3. Excluded Assets/Liabilities: List of specific assets or liabilities excluded from the transaction
4. Key Employees: List of essential employees and any special arrangements
5. Required Consents: List of third-party consents needed for the transaction
6. Anticipated Timeline: Detailed schedule of key dates and milestones
Relevant legal definitions
Clauses
Relevant Industries
Manufacturing
Technology
Retail
Professional Services
Healthcare
Real Estate
Financial Services
Construction
Transportation
Energy
Mining
Agriculture
Hospitality
Entertainment
Education
Relevant Teams
Legal
Finance
Corporate Development
Strategy
Executive Leadership
Operations
Mergers & Acquisitions
Business Development
Tax
Compliance
Relevant Roles
Chief Executive Officer
Chief Financial Officer
Corporate Development Director
Head of Strategy
General Counsel
Legal Director
M&A Director
Business Development Manager
Finance Director
Investment Director
Corporate Secretary
Board Member
Managing Director
Operations Director
Integration Manager
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