Term Sheet
A non-binding document outlining the key economic and governance terms of a proposed investment, serving as the basis for negotiating definitive legal agreements.
In PE, term sheets cover valuation, investment structure, governance rights, board composition, protective provisions, and exit mechanics. While non-binding, term sheets establish the negotiating framework that almost always shapes the final deal.
The term sheet stage is critical in the investment process — it's where economic alignment between buyer and seller is established before the expensive process of legal documentation begins.
How Octum helps
Octum's Deal Workspace provides a secure environment for term sheet sharing and structured Q&A during early-stage deal negotiations.
Frequently Asked Questions
What is a term sheet?
A term sheet is a non-binding document outlining key economic and governance terms of a proposed investment — including valuation, structure, board rights, and exit mechanics — serving as the negotiating framework for definitive agreements.
Are term sheets legally binding?
Term sheets are generally non-binding, though certain provisions (confidentiality, exclusivity, expenses) may be binding. They establish the negotiating framework that typically shapes the final deal terms.
What key terms are included in a PE term sheet?
Key terms include valuation, investment amount and structure, governance rights, board composition, protective provisions (anti-dilution, liquidation preference), and exit mechanics.
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