"Due diligence is looking good so it is time in the process to get started on the formal contract of sale. The contract stages should generally take between 4-6 weeks depending on how quickly Solicitors are able to move."
Before asking your solicitor to jump into the contract, it is much more efficient to confirm the non-financial terms of the deal with the other side in a “Term Sheet”. We like to prepare the term sheet to coincide with the due diligence timeline.
There can be a lot to consider that a lot of sellers and buyers don’t think about.
Not so say that a term sheet should be an overcomplicated soup pot of complex terms, biased conditions, unnecessary clauses, seasoned with a splash of business broker ego.
A business broker with the experience of many deals should know how to achieve the most meaningful term sheet that addresses critical issues, whilst keeping the terms….(wait for it)…SIMPLE!!
The purpose of the term sheet is to clearly lay out for the Solicitors the exact terms have been agreed in principle and need to be in the contract. This allows the solicitors to effectively prepare and execute the formal contract of sale without burning hours in time negotiating essential terms – a costly expense for the client.
A less diplomatic way of saying this, and with the utmost respect to our Solicitor comrades, is that you don’t want your Solicitor to get in the way of a good deal.
Ultimately a great term sheet should save everyone time and money.
A great term sheet should confirm the conditions around the following items:
✓ Payment Terms
✓ Lease
✓ Employees and Contractors
✓ Plant and Equipment
✓ Intellectual Property
✓ Customers
✓ Suppliers
✓ Transition and Handover
✓ Pre-completion obligations
✓ Post completion obligations
Both the seller and buyer will be far better off starting the contract stages with the intentions of what they both want to achieve with these terms clear and laid out.
This gives bother the seller and buyer confidence to start the contract stages with optimism and knowing they are aligned.
From there, they can move onto perhaps the most stressful part of the process – the formal contract of sale, which we will get into next week, and why choosing the right solicitor is so important.
Daniel Kogan
(m) 0401 620 918
(t) (02) 8923 2632
Dan Levitus
(m) 0450 326 146
(t) (02) 8923 2632