Why do I need a Term Sheet for Sale and Purchase of Business?
This Term Sheet is a handy, cost-effective tool for business owners starting negotiations with someone to buy their business.
The Term Sheet sets out the key points for a proposed business sale and purchase, as a precursor to the more detailed and legally binding Agreement for Sale and Purchase of Business. It isn’t essential to agree a Term Sheet prior to a binding agreement (straightforward deals may be able to bypass this step). However, for more complex transactions, ensuring the seller and buyer are generally on the same page from the get-go can save loads of time, legal fees and disruptive protracted negotiations down the road. It should also result in easier and faster negotiation of the Agreement for Sale and Purchase of Business (and reduced legal fees) as the groundwork is already done.
Using our Term Sheet should help identify any roadblocks, misunderstandings or major discrepancies in expectations between the seller and a potential buyer. Much better to find out upfront than after you’ve spent a fortune on lawyers!
When you purchase our Term Sheet, we'll provide you with a 40% discount code to use on your subsequent purchase of an Agreement for Sale and Purchase of Business and Assets.
What’s in this Term Sheet for Sale and Purchase of Business?
The terms are non-binding, meaning they do not create any legal rights or obligations to sell or purchase the business and are to be used only for discussion and negotiation purposes. A binding agreement won’t exist until the seller and buyer have signed a legally binding Agreement for Sale and Purchase of Business. However, there are a couple of key exceptions where the terms are binding – confidentiality (information shared between the parties must be kept secret) and optional exclusivity (the parties can’t discuss the proposed deal with anyone else for an agreed time. The term sheet is also governed by NZ law.
The Term Sheet sets out all the essential terms of a business sale and purchase transaction, such as indicative price, timing of payment, included and excluded assets (eg. debtors, specific fixed assets or intellectual property), optional price adjustment for changes in the level of stock, conditions, employee offer terms, optional handover assistance terms, timeline and optional non-competition and non-solicitation restraints.
How long will it take to create my document?
10 minutes – less time than doing the coffee run! During the Q&A you can save your progress to come back later, or repeat the Q&A to change an answer or produce a new version of a document.
What information do I need to complete the Q&A?
- The name and contact details of the seller and buyer
- Indicative purchase price, whether an adjustment will be made for changes in stock, and payment terms (will a deposit be paid?)
- Matters the proposed transaction is conditional on (due diligence and signing an Agreement for Sale and Purchase of Business are automatically included, but what about buyer finance or consent to the transaction from key customers/suppliers or the seller’s landlord) and the date these conditions need to be met
- Completion date (also known as settlement date)
- Handover assistance terms (eg. who will provide this help and for how long), if selected
- Non-competition and non-solicitation terms – will the seller (and its associated persons and entities) be prevented from competing with the company’s business or encouraging clients or staff to terminate or reduce their dealings with the company’s business for a fixed time (and in a certain area) after completion?
- Timetable for signing the Agreement for Sale and Purchase of Business
What if I need help?
On Your Terms has teamed up with Luminate Legal to offer its customers the option of obtaining legal advice from a lawyer to provide extra assurance and peace of mind. If you would like to ask a lawyer some quick questions about your document (or your responses to the Q&A), or have your document reviewed/edited by a lawyer, click here to view and select Luminate Legal's packages and fixed-fee pricing exclusively for On Your Terms customers.
What do I do once my Term Sheet is created?
As soon as you download the term sheet, it is ready to be used in negotiations and signed by both parties. Your document will be in Word, so you can amend it if necessary.
What other names is a Term Sheet called?
A term sheet is also known as a Memorandum of Understanding, MOU, Heads of Agreement, letter of intent, initial offer or expression of interest.
Other helpful information:
- If the seller is a company and its shareholders are selling their shares (rather than the seller selling its business), you instead need our Term Sheet for the Sale and Purchase of All Shares
- Check out our blogs: Selling Up Shop: What happens to employees when a business is sold?
- You may also find these bundles or documents useful for your business: Mutual Confidentiality Agreement, Term Sheet for Shareholders Agreement, Shareholders' Agreement, Deed of Assignment of Intellectual Property and Deed of Assignment of Lease, Agreement for Sale and Purchase of Business
- Check out our FAQs
If you’re unsure whether this Term Sheet is what you need, reach out to us at hello@onyourterms.co.nz – we’re happy to help!
If you’re not satisfied with your purchase of this product for any reason, let us know why within 10 days of your purchase and we’ll work with you to make sure you’re happy, including giving you a full refund if necessary.
Disclaimer: On Your Terms was created to provide fast, easy and affordable access to legal information and documentation. We are not a law firm and do not provide legal advice. The information and documents we provide are of a general nature, designed for common situations, and may not be suitable for your needs or circumstances. If you need legal advice, we have a network of specialist law firm partners able to help you here.