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.

If you liked this post, follow us on Facebook and Twitter sign up for our monthly newsletter using the form in the sidebar. And be sure to read the Disclaimer.

Author
Recent Posts

Charles Wentworth

Shareholder at Lofgren & Wentworth, P.C.

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.

Latest posts by Charles Wentworth (see all)

Congress Requires New COVID-19 Employment Poster - March 26, 2020
Your Business Insurance May Contain Interruption Coverage You Can Use During COVID-19 - March 20, 2020
Using Your Estate Plan to Leave Funds to a Minor - December 5, 2017

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.