Term Sheet

A term sheet is the starting point of most serious transactions. It captures the headline economics — price, ownership stake, governance rights, and key conditions — in plain language so both sides can confirm they are broadly aligned before spending money on lawyers and accountants. Because it is typically non-binding, neither party is legally locked in by signing it (though confidentiality and exclusivity clauses within it often are binding).

For families building organizational infrastructure around significant wealth, term sheets appear in several contexts: private equity fund subscriptions, direct investments into private companies, real estate joint ventures, and acquisitions of operating businesses. Understanding what a term sheet does and does not commit a family to is foundational before entering any of those activities.

Consider a family whose patriarch sold a manufacturing business and is now evaluating a direct minority stake in a regional healthcare company. The target company sends a term sheet proposing a valuation, a preferred share class, anti-dilution protection, and board observer rights. None of those terms are final, but they frame every negotiation that follows. Families commonly engage qualified legal counsel to review term sheets before responding, because the framing established here often carries forward into binding documents.

A common confusion is treating a term sheet as a formality. In practice, concessions made at the term sheet stage — on governance, liquidation preferences, or information rights — are rarely recovered later. Families active in co-investments or deal sourcing quickly learn to treat term sheet review as a substantive step, not a preliminary one.