# Identify Counterparty Term Sheet Issues Scenario 02 > Guides preparation of a seller-side prioritized issues memo identifying material problems in a buyer's proposed non-binding M&A term sheet, cross-referenced against deal economics and market data. - Skill: `finchipaiorg/identify-counterparty-term-sheet-issues-scenario-02` (Agent Skill) - Install (CLI): `npx skillmds@latest add finchipaiorg/identify-counterparty-term-sheet-issues-scenario-02` - Raw SKILL.md: https://api.skillmd.com/api/skills/finchipaiorg/identify-counterparty-term-sheet-issues-scenario-02/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Coding & Dev Tools - Author: FinchipAIOrg (https://skillmd.com/u/finchipaiorg) - Updated: 2026-09-22 - Page: https://skillmd.com/skills/finchipaiorg/identify-counterparty-term-sheet-issues-scenario-02 --- # Skill: Seller-Side Term Sheet Issue Identification ## 1. Subject-matter triage (only if applicable) - This is a seller-side review of a buyer’s non-binding M&A term sheet, so the core task is issue spotting, severity ranking, and negotiation framing rather than definitive drafting. - Separate binding from non-binding terms at the outset; binding process terms should be treated as immediate risk items even where the main economics are non-binding. - If the source set contains more than one valuation input, market comp, or draft term-sheet variant, enumerate them first and analyze each against the same seller-side lens before synthesizing priorities. ## 2. Failure modes the skill is correcting - Valuation issues are identified generically without anchoring them to the target’s financial performance or the market data in the record. - The memo reads as a flat list of comments instead of a prioritized negotiation roadmap. - Risk allocation is assessed in the abstract rather than against the specific deal profile, diligence facts, and other operative provisions. - Exclusivity, no-shop, and process restrictions are flagged without testing duration, scope, and exceptions against the pace of the transaction. - Binding provisions are overlooked or mislabeled, causing the memo to miss the terms that create immediate seller exposure. - Issue statements stop at description and do not explain the concrete economic, operational, or transaction consequence for the seller. ## 3. Legal frameworks / domain conventions that apply - Non-binding term sheets typically leave major economic and risk-allocation points open, but binding provisions still control the process and must be identified separately. - Seller-side valuation analysis should be grounded in the target’s financial trajectory, quality of earnings, and any market comparables supplied in the source set. - Working capital and purchase-price adjustment terms affect effective headline value and post-signing dispute risk; seller-favorable drafting reduces uncertainty in the normalization baseline and true-up mechanics. - Indemnification terms are evaluated by basket, cap, survival, exclusions, and claim procedures; seller-favorable positions narrow post-closing exposure and limit open-ended claims. - Earnout structures require special scrutiny for metric design, operational control, anti-manipulation protections, and dispute mechanics. - Exclusivity and no-shop terms should be tailored to diligence and documentation needs; overbroad or extended lockups are seller-unfriendly in a competitive process. - Broad representations and covenants often signal where definitive-agreement negotiations will become most contentious. ## 4. Analytical scaffolds - Review the term sheet provision by provision from the seller’s perspective and separate headline economics, risk allocation, process mechanics, and drafting ambiguities. - For each issue, state the provision, why it is problematic, and whether the problem is legal, economic, or process-driven. - Tie valuation comments to the company’s financial data and tie risk-allocation comments to the market materials or diligence facts in the record. - Where the source set contains multiple relevant figures, dates, or counterparties, identify them explicitly before comparing the term sheet to each. - Treat every identified issue as incomplete unless it includes: - a scale reference drawn from the source documents; - the related clause, schedule, or document that interacts with it; - the downstream consequence to the seller. - Distinguish drafting clarifications from substantive objections so the memo does not overstate minor language issues. - Use a severity ladder consistently from top to bottom; apply the same scale to every issue and justify the rank in one line. ## 5. Vertical / structural / temporal relationships (only if applicable) - Track how process terms constrain later stages of the deal: exclusivity, access rights, timing assumptions, and signing conditions can materially affect leverage before definitive documents are exchanged. - Track how economics flow through the deal structure: purchase price, working capital adjustment, earnout, escrow, holdback, and indemnity cap should be assessed as a connected package, not as isolated provisions. - Track which obligations survive signing and closing, and which are intended to be binding immediately versus only reflected in later definitive agreements. - If multiple periods matter, compare the proposed duration of each restriction or exposure window against the expected signing-to-closing timeline and post-closing survival period. ## 6. Output structure conventions - Deliver a single prioritized issues memo suitable for the seller side. - Open with a short executive summary that states the overall deal posture and the few highest-priority objections. - Define the severity scale once near the top and use it uniformly for every issue entry. - Organize the body by priority tier, then by issue. - For each issue, include: - the term or provision at issue; - the concern; - the recommended revision or counterproposal; - the basis in the source documents or market convention; - a short severity rationale; - the consequence if left unchanged. - End with a concise Recommended Actions section that assigns each action to the appropriate role and ties it to a transaction milestone or immediate next step. - Keep the tone commercial and practical; avoid restating the term sheet unless doing so advances the seller-side recommendation.