What are “terms”?

Every business deal has layers of terms, some of which are more important than others.  We like to call these layers the boulders, rocks, and the sand.

Boulders are the biggest terms, the deal breakers.  Often times these are non-negotiable.

Rocks are the next level in.  They are more negotiable and can be things that one party might be willing to give up if they will get something of equivalent value in return—either a change in the price or another more beneficial “rock.”

The sand in a deal is generally the boilerplate terms that all deals have.  Sometimes what one party thinks is not a big deal at all can still be the “sand” and can cause a deal to go off the rails.  More often, though, if there are going to be problems with a deal, it is because of the boulders or the rocks.

Before you start negotiating your next business deal, you should sit down and think about which things you can’t do without, which things you would like to have (or are willing to give up) but that are not necessary, and which things you could care less about.

Below is a short list of the kinds of terms that you should be considering:

These could be either boulders or rocks, depending on what the client’s priorities are:

  • Type of transaction:  asset vs. stock deal
  • Purchase price
    • Cash vs. financed
    • Purchase price allocation
  • If financed, what those terms will be
    • Seller holing the note or outside financing
    • Length
    • Interest
  • Intellectual property
    • Sale vs. licensing
  • Non-competes
    • Geographic area
    • Length of time
    • Who can or cannot be solicited
  • Lease
  • Employment contracts
  • Default provisions
  • Notice provisions
  • Representations and warranties

Whether these terms are the boulders, rocks, or sand for your deal will depend on what your priorities are.  If you don’t know where to start, give us a call today to discuss your next transaction.

 

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Charles Wentworth

Charles is an attorney in Glen Ellyn, Illinois.After graduating from the University of Utah, he clerked for Chief Justice John T. Broderick of the New Hampshire Supreme Court. He then became a litigation associate at Kirkland & Ellis LLP before opening his own office and partnering with Rick Lofgren. He lives just outside of Chicago, where he participates in community activities, including Boy Scouts and little-league baseball.
Charles Wentworth
Charles Wentworth
Charles Wentworth
Charles is an attorney in Glen Ellyn, Illinois. After graduating from the University of Utah, he clerked for Chief Justice John T. Broderick of the New Hampshire Supreme Court. He then became a litigation associate at Kirkland & Ellis LLP before opening his own office and partnering with Rick Lofgren. He lives just outside of Chicago, where he participates in community activities, including Boy Scouts and little-league baseball.