The Business Acquisition Term Sheet is a crucial preliminary document used in Canadian M&A transactions to memorialize the key commercial and legal terms agreed upon between parties during initial negotiations. It serves as a foundation for due diligence and the preparation of definitive agreements, incorporating considerations from Canadian federal and provincial legislation. While primarily non-binding, it demonstrates serious intent and typically includes binding provisions regarding confidentiality, exclusivity, and expense allocation. The document is particularly valuable in complex transactions where clarity on fundamental terms is essential before proceeding with detailed due diligence and final documentation. It helps align parties' expectations early in the process and provides a structured framework for progressing the transaction efficiently.
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1. Parties: Identification of the buyer, seller, and target company with full legal names and jurisdictions
2. Background: Brief context of the proposed transaction and purpose of the term sheet
3. Definitions: Key terms used throughout the term sheet
4. Transaction Structure: Type of transaction (asset/share purchase, merger) and basic mechanics
5. Purchase Price: Proposed consideration, including amount, form of payment, and any adjustments
6. Payment Terms: Timing and method of payment, including any deferred consideration or earnout provisions
7. Key Assets/Business: Description of the business/assets being acquired
8. Due Diligence: Scope, process, and timeline for due diligence investigation
9. Conditions Precedent: Key conditions that must be satisfied before closing
10. Timeline: Expected dates for key milestones including signing, due diligence, and closing
11. Exclusivity: Terms of exclusive negotiation period
12. Confidentiality: Confidentiality obligations of the parties
13. Binding Effect: Clear statement of which provisions are binding and non-binding
14. Costs: Responsibility for transaction costs and expenses
15. Governing Law: Applicable law and jurisdiction
1. Employee Matters: Terms relating to employee retention, benefits, and transition - include when workforce is a key component of the acquisition
2. Regulatory Approvals: Specific regulatory requirements and approval processes - include when transaction requires regulatory clearance
3. Intellectual Property: Special provisions for IP transfer or licensing - include when IP is a significant asset
4. Real Estate: Property-related terms - include when real estate is a material component
5. Environmental Matters: Environmental compliance and liability provisions - include for industries with environmental exposure
6. Financing Contingency: Terms related to buyer's financing requirements - include when purchase is subject to financing
7. Non-Competition: Non-compete and non-solicitation terms - include when protecting business value post-acquisition
8. Tax Structure: Preliminary tax considerations - include when tax structure is critical to deal value
9. Break-up Fee: Terms of termination fee - include in larger transactions or competitive situations
1. Purchase Price Calculation: Detailed breakdown of purchase price components and adjustments
2. Key Assets Schedule: Preliminary list of material assets included in the transaction
3. Excluded Assets/Liabilities: Preliminary list of assets and liabilities excluded from the transaction
4. Key Contracts: List of material contracts requiring review or assignment
5. Required Consents: Preliminary list of third-party consents needed
6. Key Employees: List of key employees and proposed retention terms
7. Timeline Schedule: Detailed transaction timeline with key dates and deadlines
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