Term Sheet

A loan with a specified repayment schedule and maturity date, drawn in full at inception (or in agreed instalments) and repaid through regular principal and interest payments over its term. Term loans may be amortising (with regular principal repayments) or bullet (with principal repaid in full at maturity).

A term in a venture capital or private equity investment that determines the order and amount in which investors are paid before other shareholders in a liquidation event (sale, wind-down, or IPO). Common structures include 1x non-participating and 1x participating preferences.

The investor who takes the primary role in a financing round, typically investing the largest amount, setting the terms, negotiating the term sheet, and conducting due diligence. The lead investor often takes a board seat and serves as the main point of contact for the company.

The configuration of financial, legal, and operational terms governing a merger, acquisition, or investment transaction. Deal structure encompasses the mix of cash and equity consideration, earn-out arrangements, escrow provisions, representations and warranties, indemnification mechanisms, and governance rights.

The percentage ownership interest a shareholder holds in a company. Equity stakes determine voting rights, dividend entitlements, and the share of proceeds received in a sale or liquidation event.

A Latin term meaning 'on equal footing,' used in finance to indicate that two or more parties, instruments, or claims have equal rights to payment or assets. In venture capital, pari passu clauses ensure that investors in the same class receive proportional treatment during distributions or liquidation events.

An independent assessment, typically prepared by an investment bank or valuation firm, that evaluates whether the financial terms of a proposed transaction are fair from a financial point of view to a company's shareholders. Fairness opinions are standard practice in significant M&A transactions and require rigorous valuation of both tangible and intangible assets.

Contractual mechanisms that protect existing investors from the dilutive effects of a subsequent financing round at a lower valuation than the round in which they invested. Common forms include full ratchet anti-dilution (which adjusts the conversion price to the new lower price) and weighted average anti-dilution (which adjusts based on the relative size of the new round).

What is a no-shop clause and how long is it typical?

A no-shop clause prevents the company from actively seeking alternative buyers or investors for a defined period (typically 30-60 days), giving the lead investor time to conduct due diligence.

What is a term sheet and what are its key terms?

A term sheet is a non-binding agreement outlining the key financial and legal terms of an investment — including valuation, investment amount, liquidation preference, board rights, and anti-dilution.

What is a term sheet and what does it commit both parties to?

A term sheet outlines investment terms (valuation, amount, rights, protections) and is usually non-binding except for exclusivity, fee payment, and confidentiality clauses.