Points to raise with the seller
- 5 terms reviewed; 0 accepted as concerns, 0 with counsel.
- Obligations the term sheet would create: 0.
Executive Intelligence · Advanced Executive Intelligence
M&A and Partnership Intelligence
A deal room for targets and partners with a diligence checklist, evidence, risks and approvals.
Demonstration: Halden Hospitals Group (fictional) · Healthcare. Fictional data and a scripted answer.
The situation
- Organisation
- Halden Hospitals Group (fictional)
- Who is asking
- Director of corporate development
- Industry
- Healthcare
- What happened
- The group has received a non-binding term sheet to acquire a small diagnostic imaging company, with a short window to respond.
The question asked
What in this term sheet needs the board's attention before we respond?
What it reads, and who can see the result
- Term sheet documentThe proposal as received.
- Deal principles documentWhat the board has said it will accept.
- Reads
- The term sheet and the board's deal principles.
- Does not read
- Any data room contents.
- Permission
- Corporate development access.
- Who sees it
- The director of corporate development, the general counsel and the CFO.
Try it
Read each highlighted clause and accept it, reject it, or send it to counsel. A clause the analysis is unsure how to read cannot simply be accepted.
Non-binding term sheet: acquisition of Pellam Imaging · 6 clauses read, 5 highlighted
1The price is 41 million, payable in cash at completion.
2The seller grants the buyer exclusivity for sixty days, and the buyer shall not withdraw without paying the seller's costs up to 600,000.
high risk Exclusivity Reading clear
Break fee on withdrawal: outside the board's principles
Obligation: Buyer pays the seller's costs if it withdraws (after the sixty-day period starts)
3The price will be adjusted for net debt and working capital at completion.
medium risk Price adjustment Reading uncertain
The working-capital target is not defined
4The seller's warranties are limited in total to ten per cent of the price.
high risk Warranties Reading clear
Cap is below the board's twenty per cent minimum
Obligation: Seller gives warranties capped at ten per cent (from completion)
5Key employees will be retained on terms to be agreed.
medium risk People Reading uncertain
'Key employees' and the terms are not defined
6Completion is subject to regulatory clearance in the seller's jurisdiction.
medium risk Conditions Reading clear
Timing risk: clearance period unknown
- Accepted
- 0 (0 obligations)
- Rejected
- 0
- With counsel
- 0
- Undecided
- 5
The answer
Simulated answer. Written for this fictional case, not produced by a live model. Only the figures in it are computed, from what you decided above.
5 of 6 terms need attention; you have accepted 0, rejected 0 and sent 0 to counsel.
Two terms are outside the board's own principles: a break fee on withdrawal and a warranty cap half the board's minimum [S1][S2]. Both would need to be changed or approved by the board, and the first is time-sensitive because exclusivity starts the clock.
Two readings are uncertain and cannot simply be accepted: the working-capital target and the meaning of 'key employees'. They go to counsel. You have accepted 0 into the register of obligations the term sheet would create.
Relies on: S1 · Term sheet (fictional), 4 pagesS2 · Board deal principles
Review and approval
The director of corporate development with the general counsel decides. Approving fixes the points to raise with the seller and takes them to the board. It does not accept the term sheet or sign anything.
Not ready to approve. 5 highlighted clauses are still undecided. Accept, reject or send each to counsel first.
In the product this is a different person with the right permission. Here you play that role to see the rule.
What it produces
Limits of this example
- A non-binding term sheet is a starting point; the definitive agreement governs.
- Valuation is not assessed here.
- This is a scripted demonstration on fictional data. No model was called and no real organisation, person or result is shown.
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