An Acquisition Term Sheet is a crucial preliminary document used in the early stages of merger and acquisition transactions in Hong Kong. It sets out the fundamental terms and understanding between parties before proceeding with detailed due diligence and negotiating definitive agreements. While primarily non-binding, it typically includes certain binding provisions such as confidentiality, exclusivity, and governing law clauses. The document reflects Hong Kong's legal and business practices, considering local corporate laws, securities regulations, and market conventions. It serves as a roadmap for the transaction, covering essential elements like deal structure, valuation, conditions precedent, and timing, while allowing flexibility for detailed terms to be negotiated in the final documentation.
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1. Parties: Identification of buyer, seller, and target company with full legal names and registration details
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: Overview of the proposed acquisition structure (share purchase, asset purchase, etc.)
5. Purchase Price: Proposed consideration and payment terms, including any adjustments
6. Key Terms: Essential commercial terms including timing, conditions precedent, and key commitments
7. Due Diligence: Scope and process for conducting due diligence investigation
8. Exclusivity: Terms of exclusive negotiation period if applicable
9. Confidentiality: Confidentiality obligations regarding the transaction and information exchange
10. Costs: Allocation of transaction costs and expenses
11. Binding Effect: Clear statement of which provisions are binding and non-binding
12. Governing Law: Specification of Hong Kong law as governing law
1. Break Fee: Include when parties agree to a break fee arrangement for transaction termination
2. Earn-out: Include when purchase price includes performance-based additional payments
3. Management Arrangements: Include when there are specific arrangements for key management post-acquisition
4. Regulatory Approvals: Include when transaction requires specific regulatory clearances
5. Warranties and Indemnities: Include high-level overview when parties want to address key warranty areas
6. Employee Matters: Include when there are specific employment-related arrangements to be addressed
7. Intellectual Property: Include when IP assets are a key component of the transaction
8. Timeline: Include when parties want to set specific milestone dates for the transaction
1. Corporate Structure: Current and proposed corporate structure diagrams
2. Key Assets: High-level list of material assets included in the transaction
3. Price Calculation: Overview of purchase price calculation methodology if complex
4. Key Contracts: List of material contracts requiring attention during the transaction
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