#Term Sheet Lawyer in France

A term sheet is the preliminary document that sets out the main terms of an investment or an acquisition before the definitive documentation is drafted. It is often presented as a simple, non-binding summary of intentions. That description is misleading: even when it does not bind the parties on the substantive terms, the term sheet sets the parameters of the final negotiation, its exclusivity and confidentiality clauses are often expressly stated to be binding, and the negotiation must meet the requirements of good faith (Article 1112 of the French Civil Code (in French)). A term sheet that is misunderstood or poorly negotiated can lead to unfavourable definitive documents.

We assist founders, executives and sellers in analysing and negotiating the term sheets they receive in fundraising rounds, LBO transactions or business sales.

Term sheets in a French fundraising round

In a fundraising round, the term sheet proposed by the investor sets the valuation, the amount of the investment, the type of securities issued (ordinary or preference shares), the rights attached to those securities, the closing conditions and the main provisions of the future shareholders’ agreement.

The most significant mechanisms are generally liquidation preferences (which determine how the proceeds of a sale are split between investors and founders), anti-dilution clauses (which protect investors against a round at a lower valuation), veto rights over strategic decisions and founder retention undertakings.

Each of these mechanisms has practical effects on the founders’ position in the event of a sale or a new round. We explain them, compare them with market practice and negotiate the necessary adjustments.

Term sheets in an M&A transaction

In the sale or acquisition of a business, the term sheet (or letter of intent) sets the indicative price, the conditions precedent, the exclusivity period, the due diligence arrangements and the outline of the expected warranty and indemnity (garantie d’actif et de passif). The exclusivity period commits the seller not to negotiate with other parties for a defined period, which creates a significant imbalance.

We analyse the letters of intent you receive and identify the implicit commitments and the conditions that could be used as leverage in the final negotiation.

Points we always check

Whatever the type of transaction, we always check the exclusivity clauses and their duration, the conditions precedent and how precisely they are drafted, the confidentiality undertakings and their scope, any break-up fee clauses in the event of failure, and whether the valuation is consistent with the price adjustment mechanisms (earn-out, price adjustment, locked box).

From term sheet to definitive documentation

The term sheet is only the first step. We also assist with drafting and negotiating the definitive documentation: shareholders’ agreement, terms of issue of the securities, SPA, warranty and indemnity. See our dedicated pages on the SPA lawyer, the warranty and indemnity lawyer and the fundraising lawyer.

When to consult us

Before signing a term sheet received from an investor or a buyer. Before sending a letter of intent to a seller. When the terms of a term sheet seem complex or unbalanced to you. As soon as you enter a fundraising or sale process.

Every situation is different: the information on this page is general and does not replace legal advice tailored to your case. The firm makes no promise of outcome; it commits to the means it deploys.