48: Mergers & Acquisitions Part 2: Do I need a Term Sheet?

10/14/24 • 24 min

Smarten Up! The Tax and Business Podcast

Curious how mergers and acquisitions truly take shape? Let’s dive into the heart of the M&A process, breaking down the critical steps behind drafting a Term sheet (otherwise known as a Heads of Agreement or a Letter of Intent) and ensuring your deal stays on track.

In this episode, we’re continuing our three-part M&A series, focusing on the pivotal moment in any merger or acquisition: drafting theTerm Sheet.

Sally demystifies how this document sets the tone for the entire deal, explains the importance of structuring the transaction correctly, and discusses the financial implications that can impact the success of the sale.

We’re talking everything from asset purchases to share acquisitions, the role of tax advisors, and why exclusivity and confidentiality are must-haves in your Term Sheet. Plus, Sally highlights the importance of expert advice before putting pen to paper — because a deal done wrong could later fall apart.

In this episode of Smarten Up! The Tax and Business Podcast, you'll learn:

Recap of M&A Part 1 (00:50)
What is a Term Sheet and why it matters (02:15)
How the structure of your deal — whether an asset or share purchase — affects due diligence and long-term outcomes (05:30)
Why you need tax and legal experts at the table early on (12:10)
Methods of calculating the final settlement payment calculated in M&A deals and how they impact both buyer and seller (16:30)
How earnouts bridge the gap between buyer and seller valuations (22:45)
Elements crucial for protecting buyer and seller as the deal progresses (26:00)
Termination clauses and binding/non-binding provisions (30:40)

Whether you're thinking of selling, acquiring, or just curious about how these business transactions happen, this episode will give you valuable insights into the high-stakes negotiation process that ensures both parties are aligned before moving forward.

Stay tuned for the final episode, where we delve into due diligence and post-closing steps!

CONNECT WITH SALLY PRESTON

Website: http://www.smartsolutionstax.com.au/
Facebook: https://www.facebook.com/SmartSolutionsTax
Instagram: https://www.instagram.com/smartsolutionsau/
Smarten Up - The Tax and Business Podcast Facebook: https://www.facebook.com/profile.php?id=61555018481517
Smarten Up - The Tax and Business Podcast Instagram: https://www.instagram.com/smarten_up_podcast/
LinkedIn: https://www.linkedin.com/company/smart-solutions-tax-and-business-advisory/

In this episode, we’re continuing our three-part M&A series, focusing on the pivotal moment in any merger or acquisition: drafting theTerm Sheet.

In this episode of Smarten Up! The Tax and Business Podcast, you'll learn:

Recap of M&A Part 1 (00:50)
What is a Term Sheet and why it matters (02:15)
How the structure of your deal — whether an asset or share purchase — affects due diligence and long-term outcomes (05:30)
Why you need tax and legal experts at the table early on (12:10)
Methods of calculating the final settlement payment calculated in M&A deals and how they impact both buyer and seller (16:30)
How earnouts bridge the gap between buyer and seller valuations (22:45)
Elements crucial for protecting buyer and seller as the deal progresses (26:00)
Termination clauses and binding/non-binding provisions (30:40)

Stay tuned for the final episode, where we delve into due diligence and post-closing steps!

CONNECT WITH SALLY PRESTON

Website: http://www.smartsolutionstax.com.au/
Facebook: https://www.facebook.com/SmartSolutionsTax
Instagram: https://www.instagram.com/smartsolutionsau/
Smarten Up - The Tax and Business Podcast Facebook: https://www.facebook.com/profile.php?id=61555018481517
Smarten Up - The Tax and Business Podcast Instagram: https://www.instagram.com/smarten_up_podcast/
LinkedIn: https://www.linkedin.com/company/smart-solutions-tax-and-business-advisory/

Previous Episode

47: Mergers & Acquisitions Part 1: The Early Stages of M&A Explained

Behind every successful M&A deal lies a complex web of strategy, preparation, and negotiation. Ready to unravel the mystery?

In this episode, Sally Preston takes us through the foundational steps of a mergers and acquisitions (M&A) deal. From strategic planning to initial negotiations, she offers a clear breakdown of the process, highlighting why thorough preparation is critical for both buyers and sellers.

Sally shares real-world examples of M&A deals gone wrong, emphasising the importance of having accurate financials and organising your business before pursuing a sale. With insights on finding the right fit, engaging in early conversations, and protecting proprietary information with NDAs, this episode is packed with actionable advice for navigating the early stages of M&A.

Plus, Sally gives a sneak peek into the next steps — what happens when the deal moves from conversation to commitment.

Whether you're buying, selling, or just curious about the M&A process, this episode is your roadmap to the key decisions and strategies that can make or break a deal.

In this episode of Smarten Up! The Tax and Business Podcast, you'll learn:

An overview of mergers and acquisitions (M&A) and why they’re vital for growth and competition (00:03)
The first phase of any M&A deal and why knowing your goals before you begin is crucial (01:12)
How one seller’s failure to prepare almost derailed a deal (03:15)
Why finding a strategic match is key to a successful M&A (05:40)
Approaching potential buyers or sellers and establishing genuine interest early on (08:20)
Why a non-disclosure agreement is essential before sharing proprietary details (10:15)
What buyers need to know before making an initial offer — and why sellers tend to be wary (13:00)
How initial offers are made, and why deal structure discussions are just as important as price (15:45)
What happens once the buyer and seller agree to proceed (19:30)

We’ve uncovered the groundwork of M&A deals, from strategy to that all-important NDA. Next, we'll dive deeper into what happens after a letter of intent is signed. Let’s continue to explore the fascinating world of mergers and acquisitions together!

CONNECT WITH SALLY PRESTON

Website: http://www.smartsolutionstax.com.au/
Facebook: https://www.facebook.com/SmartSolutionsTax
Instagram: https://www.instagram.com/smartsolutionsau/
Smarten Up - The Tax and Business Podcast Facebook: https://www.facebook.com/profile.php?id=61555018481517
Smarten Up - The Tax and Business Podcast Instagram: https://www.instagram.com/smarten_up_podcast/
LinkedIn: https://www.linkedin.com/company/smart-solutions-tax-and-business-advisory/

Next Episode

49: Mergers & Acquisitions Part 3: Does Due Diligence Really Matter?

Ready to dive into the high-stakes world of mergers and acquisitions? Discover the critical steps between a signed term sheet and a closed deal — everything from due diligence to final integration!

In this episode, Sally takes you through part three of her deep dive into mergers and acquisitions. She breaks down the intricate process that follows the drafting of the term sheet, including due diligence, contract negotiations, and final integration.

We begin by recapping the essential elements leading up to a signed term sheet and quickly move into the critical due diligence phase. You’ll then get an insider’s look at the negotiation adjustments that often follow, before being walked through the final closing, the importance of expert legal counsel, and the often-overlooked integration phase that can make or break a deal.

In this episode of Smarten Up! The Tax and Business Podcast, you'll learn:

Recap of M&A Parts 1 and 2 (00:37)
The importance of due diligence and how it uncovers hidden risks and verifies value (03:35)
Financial due diligence and how it impacts the deal’s valuation (04:46)
Legal due diligence and how it can protect you from unforeseen legal headaches (06:45)
Operational and commercial due diligence and why you should dig into these areas yourself (09:28)
Tax and IT due diligence for a smooth post-acquisition integration (12:39)
Why due diligence matters for both buyer and seller (14:53)
Adjustments that may arise after due diligence, including price changes and restructured agreements (17:33)
Drafting the definitive legal agreement and why expert legal guidance is crucial for buyers and sellers alike (22:33)
Closing the deal and integration (23:52)

CONNECT WITH SALLY PRESTON