Draft Term Sheet Scenario 01

Skill: Acquisition Term Sheet Drafting

1. Subject-matter triage

• Determine whether the source set supports a full acquisition term sheet or only a partial draft with flagged assumptions.
• Identify the transaction architecture first: asset purchase vs. stock purchase, cash vs. rollover economics, signing vs. closing separation, and whether any ancillary arrangements are integral to the deal.
• If multiple counterparties, instruments, or closing paths appear in the materials, enumerate them before drafting and choose the operative path only after checking for internal consistency.
• Draft the primary file first and ensure it contains the operative term sheet, not a summary of what should be in it.

2. Failure modes the skill is correcting

• The draft states headline economics but omits the adjustment mechanics, measurement point, or assumptions that determine the real consideration.
• Financing language is either missing or overbroad, failing to track the actual certainty-of-funds structure reflected in the deal set.
• Binding and non-binding provisions are mixed together, obscuring which clauses are intended to create legal effect.
• Exclusivity is drafted without a usable period, scope, or carve-outs, making the business restriction ambiguous.
• Open items are left scattered through the body instead of being collected in a discrete issues section with counsel recommendations.
• The draft treats unresolved items as settled, rather than flagging them as drafting assumptions or negotiation points.
• The document reads like notes rather than a transaction instrument, with no clean structure, defined terms, or execution-ready provisions.

3. Legal frameworks / domain conventions that apply

• Term sheets in M&A are typically non-binding as to substantive deal terms unless expressly stated otherwise; binding effect is usually limited to confidentiality, exclusivity, expenses, governing law, and similar procedural provisions.
• The drafting should track standard acquisition term-sheet conventions: transaction structure, purchase price, adjustments, working capital or similar reference mechanics, financing status, conditions to closing, covenants, and termination rights.
• Purchase economics must be expressed with enough precision that the reader can infer how the consideration is determined from the source materials, without inventing unsupported arithmetic.
• If earnout, rollover, escrow, holdback, indemnity cap, or similar contingent economics appear in the source set, the term sheet should identify the metric, timing, and governing principle, while leaving nonfinal detail for the open issues section when needed.
• Exclusivity or no-shop provisions should identify who is restricted, what conduct is restricted, any stated exceptions, and how long the restriction lasts.
• Counsel recommendations should distinguish between deal-term drafting fixes, diligence follow-ups, and points that require business confirmation before the next draft.
• Applicable legal propositions should be stated with the controlling authority or conventional doctrine supporting them when the draft relies on legal characterization rather than mere transactional preference.

4. Analytical scaffolds

• Extract the operative deal terms from all documents and reconcile them into one internally consistent transaction narrative before drafting text.
• Separate hard terms from soft assumptions: place agreed terms in the body and unresolved items in the open issues section.
• For each economic term, identify the reference point, adjustment mechanism, and any condition or contingency that affects the final outcome.
• For each binding provision, state the legal effect directly and label it as binding; do not bury it inside the non-binding recitals.
• For each unresolved issue, state what is unresolved, why it matters to the transaction, and what counsel should do next.
• If the materials present more than one plausible structure or alternative, list the alternatives explicitly before selecting the drafting path.
• Keep the draft commercially readable: use standard term-sheet headings, concise prose, and deal-oriented terminology rather than memo-style commentary.

5. Vertical / structural / temporal relationships

• Preserve the timeline from indication to signing to closing; do not collapse pre-signing diligence, signing conditions, interim covenants, and closing deliverables into one undifferentiated block.
• If the documents contain staged milestones, approval steps, or deferred determinations, place each in the section that matches when it operates.
• Ensure the sequence of provisions reflects dependency: structure and economics first, then conditions, then covenants, then binding mechanics, then unresolved items.
• If a term depends on another document, clause, schedule, or approval, make that dependency explicit rather than implying it.
• When multiple periods or dates are implicated, identify them separately before analysis and keep each period tied to its own operative consequence.

6. Output structure conventions

• Produce a single acquisition term sheet suitable for term-sheet.docx.
• Use conventional term-sheet headings, with a clear non-binding statement and separate labeling for any binding provisions.
• Include a discrete open issues and counsel recommendations section at the end of the term sheet.
• If the source set does not resolve a material point, flag it as unresolved instead of filling the gap with unstated assumptions.
• Keep the draft concise but complete enough to function as the working deal document.
• Before finishing, verify that the primary deliverable file exists, is non-empty, and contains operative deal language rather than commentary or placeholders.