Once a buyer has identified a target and assessed its strategic fit, the next step is negotiating the term sheet. This document serves as a preliminary agreement outlining the core deal terms before moving to definitive agreements. 

Key Financial Terms 

The term sheet should clearly define the purchase price and payment structure. If an earnout is included, buyers must ensure milestones are realistic and measurable—particularly when tied to government contract performance or technology developments. 

Regulatory Approvals & Government Contract Transfers 

Not all government contracts automatically transfer in a sale. Some require novation (a government approval process), which can delay closing. The term sheet should account for these regulatory hurdles and include contingency plans. 

Exclusivity Period 

An exclusivity agreement ensures that the seller does not engage with other buyers for a specified period, allowing the buyer to proceed with due diligence without competition. For buyers in the defense sector, this period may need to be extended to account for regulatory complexities. 

By negotiating a well-structured term sheet, buyers can reduce deal uncertainty and create a clear path toward closing.