Smarten Up! The Tax and Business Podcast

48: Mergers & Acquisitions Part 2: Do I need a Term Sheet?


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Oct 14 2024 24 mins  
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Curious how mergers and acquisitions truly take shape? Let’s dive into the heart of the M&A process, breaking down the critical steps behind drafting a Term sheet (otherwise known as a Heads of Agreement or a Letter of Intent) and ensuring your deal stays on track.

In this episode, we’re continuing our three-part M&A series, focusing on the pivotal moment in any merger or acquisition: drafting theTerm Sheet. 

Sally demystifies how this document sets the tone for the entire deal, explains the importance of structuring the transaction correctly, and discusses the financial implications that can impact the success of the sale.

We’re talking everything from asset purchases to share acquisitions, the role of tax advisors, and why exclusivity and confidentiality are must-haves in your Term Sheet. Plus, Sally highlights the importance of expert advice before putting pen to paper — because a deal done wrong could later fall apart.

In this episode of Smarten Up! The Tax and Business Podcast, you'll learn:

  • Recap of M&A Part 1 (00:50)
  • What is a Term Sheet and why it matters (02:15)
  • How the structure of your deal — whether an asset or share purchase — affects due diligence and long-term outcomes (05:30)
  • Why you need tax and legal experts at the table early on (12:10)
  • Methods of calculating the final settlement payment calculated in M&A deals and how they impact both buyer and seller (16:30)
  • How earnouts bridge the gap between buyer and seller valuations (22:45)
  • Elements crucial for protecting buyer and seller as the deal progresses (26:00)
  • Termination clauses and binding/non-binding provisions (30:40)

Whether you're thinking of selling, acquiring, or just curious about how these business transactions happen, this episode will give you valuable insights into the high-stakes negotiation process that ensures both parties are aligned before moving forward.

Stay tuned for the final episode, where we delve into due diligence and post-closing steps!

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