Deal Structure
Term Sheet
Also known as: Indicative offer, preliminary terms
The document a buyer sends outlining the proposed deal terms — price, structure, earnout, escrow, employment requirements, and key conditions. Not binding, but sets the framework for the final purchase agreement.
WHY IT MATTERS
The term sheet is where the deal starts to get real. It lays out the buyer’s proposed price, structure, key conditions, and timeline — usually in 5–15 pages. While most provisions are non-binding, the exclusivity clause typically is: once you sign, you’re locked into negotiating with that buyer for 60–90 days, and competitive tension disappears. Founders often treat the term sheet like a finish line, but it’s actually a starting gate. Every term in the sheet — earnout percentages, escrow amounts, working capital targets, employment requirements — becomes the baseline for the purchase agreement negotiation that follows. Terms that look reasonable in a summary document become expensive when the attorneys draft the binding language. The time to negotiate hard is before you sign the term sheet, not after. Once exclusivity is granted, the buyer has little incentive to improve terms and considerable leverage to worsen them.