Provided by: Jennifer Kirschenbaum, Esq.
July 13, 2017
I am selling my practice and want to know if I need a term sheet, or what is the first step?
Thanks, Dr. P
The first step in the sale process is to make sure you protect the confidentiality of your proprietary information from any inquiring potential purchasers. So, the first document we need in place is a non disclosure agreement or confidentiality agreement - same concept, different names. Assuming we have taken care of that step, a formal "Term Sheet" is definitely not a requirement for a successful deal. But, certainly a meeting of the minds on basic deal points is a great place to start! Such as - prospective closing date, purchase price, payment terms, interest amount (if any).
The main concern I have with a heavily negotiated Term Sheet is when the Term Sheet is devoid of key terms that might later impact the terms negotiated in the Term Sheet. Sounds circular, right? It is. You could end up spending a lot of time negotiating a term sheet, and then as a later step, receive purchase agreements (or present purchase agreements) that have language impacting the terms negotiated. This might put you back at square one. So, instead of spending tons of time on the Term Sheet, I prefer to have basics of the deal worked out, and then wait for the heavy lifting in the deal documents.
That being said, if you are looking to finalize a Term Sheet, make sure it is NON BINDING and subject to definitive agreements executed between the parties, AND make sure your attorney is involved at this stage.