Term Sheet Negotiations Attorney in Cincinnati
Term sheets are essential for any business that is about to engage in financing with investors, or enter into a merger or acquisition. However, just signing a term sheet provided by the other party, or engaging in term sheet negotiations without professional guidance can expose your business to unknown threats. That’s why it’s vital to work with a term sheet negotiations attorney like Paul Spitz from Kinetic Law, a Cincinnati-based startup law firm, who can help protect your deal against unforeseen legal bombshells.
Partnering with an attorney during the term sheet negotiation process will help you as you work towards closing your financing or M&A transaction.
What is a Term Sheet Negotiations Attorney?
A term sheet, also known as a letter of intent (LOI) or memorandum of understanding (MOU), acts as a blueprint for the final agreement between two parties, and generally accompanies large deals such as mergers and acquisitions or financings. It outlines the key points each party wants to include in the deal before it becomes legally binding. Even though this term sheet document isn’t typically legally binding, it irons out the key points that must be negotiated before the final documents are executed, and makes it harder for the parties to deviate from the terms outlined in the term sheet.
A term sheet negotiations attorney helps you create favorable terms for your business while identifying blind spots that can leave your business vulnerable to risks. They can help business owners understand complex terms that they may not be familiar with, as well as identify terms that are outside of the norm. They can also suggest additional terms to protect the client’s interest. By proactively pinpointing potential red flags early in the negotiation process, the founder has time to negotiate with the investors or other parties to ensure the terms are agreeable.
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Great resource to have! Paul has been super responsive and quite affordable compared to the multiple options I reviewed.- Former Client
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Paul is great. He talks things through with you, explains everything in detail and is very thorough. He always responds in a very timely manner. We at The Grocery Runners could not be happier!- Former Client
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Paul reviewed a contract for me and provided excellent recommendations. He helped me understand all the sections so I knew what I would be walking into. He's a pleasure to work with and responds quickly.- Elaine O.
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Paul has exceeded my expectations in terms of the level of customer service & deep domain expertise. If you are running/starting a small business or new venture, Paul is your guy.- Former Client
What Are Some Typical Provisions in a Financing Term Sheet?
Startup founders often encounter a venture capital term sheet when raising money for their business. There are many key points that are presented and discussed before signing on the dotted line. Here are a few examples of provisions usually included in a venture capital term sheet.
- Anti-Dilution. Investors may want protection against dilution of their interests in future funding rounds. Depending on the structure and size of the deal, anti-dilution may not be a common deal term. In addition, there are certain types of anti-dilution protection, such as “full ratchet,” which are extremely rare and almost always unacceptable deal-killers.
- Co-Sale Rights. This gives the investor the right to sell its shares alongside a founder that wants to sell some stock, reducing the founder’s ability to sell as much stock, and receive as much cash, as originally desired.
- Participation Rights. Startups often need additional funding rounds to enable growth and expansion of the business. Participation rights allow the investor to invest more money in such future rounds, to maintain their ownership stake. This is often not a problem, but there is a risk if a problematic investor wants to exercise these rights.
Confusing, right? Some of these provisions can make your head spin if you don’t know what you’re looking at. That’s why it’s crucial to work with a startup and term sheet negotiations attorney that can help you understand each key point and how it will impact your business. Professional support and guidance are critical when creating a fair deal with which all parties can get on board.
Consult an Experienced Contract Law Attorney to Review Term Sheet Negotiations
Whether you’re a majority or minority owner, it’s possible to structure term sheet negotiations so both parties benefit and the terms blend seamlessly with a company’s goals and objectives.
At Kinetic Law, we have years of experience counseling entrepreneurs in business formation and structure, debt and equity financing, drafting, reviewing, and negotiating essential documents and contracts, including term sheet negotiations. We also offer general counsel services.
Contact us today for more information, or move forward and schedule a consultation.
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