A term sheet template is genuinely useful as a checklist of headings and genuinely dangerous as a document to fill in and send, because the standard wording in a downloaded template encodes somebody else's negotiating position. Eight lines do the work. Three of them carry the whole negotiation and price is frequently not the hardest of the three. This page sets out the eight and what each one is really deciding.
The five that are mostly mechanical
Parties, the structure (assets or equity), the closing conditions, the confidentiality provision and the expenses position. These are rarely where a deal dies. They are where a deal gets slow if they are vague, so writing them tightly is cheap insurance rather than a battleground.
Argued one: what the price is actually on
Not the number, the basis. Enterprise value on a cash-free debt-free basis, with a normalised working capital target, is a sentence that hides a negotiation about what normalised means. Two parties can agree a headline and still be several hundred thousand apart on the same deal.
Argued two: what is held back and for how long
Escrow, holdback or an earn-out, and the mechanics of releasing it. A seller reading only the headline will discover later that a meaningful share arrives in eighteen months conditional on something. This is the line where the difference between two offers usually lives.
Argued three: exclusivity, which the seller pays for
Length and what triggers an extension. Signing removes the competitive tension that produced the price, so a shorter period with a defined extension is worth more to a seller than a small movement on the headline. It is also the line most templates make longest by default.
Questions people ask about term sheet template
Should we use a downloaded term sheet template?
As a checklist of headings, yes. As wording to send, no: the standard phrasing encodes somebody else's negotiating position.
Which line matters most?
Usually not the price. The basis the price sits on, what is held back, and the length of exclusivity decide more of the outcome.
Is a term sheet binding?
Mostly not, in the same way an LOI is not. Confidentiality, expenses and exclusivity usually are.