2020 is expected to show a solid volume of foreign funding to Brazil, including Trade Finance and M&A transactions, and Term Sheet (TS) is a key document to be signed with the prospect Brazilian companies as to provide preliminary legal protection to lenders and investors.
TS summarizes the core terms and conditions of the deal, such as (i) for equity, the acquisition price, the payment terms, the conditions to closing, the acquire’s management powers, responsibility for liabilities, etc., and (ii) for loan facility, the line of credit, disbursement terms, conditions to withdraw, affirmative and negative covenants, collateral, and others.
Well structured TS reduces the negotiation time spent with the transaction documents and closing, particularly when the deal involved an unsophisticated counterpart.
TSs with Brazilian counterparts must contain core provisions to provide legal protection to foreign lenders and investors such as (i) whether the TS is binding or non-binding, (ii) if the line of credit is committed or uncommitted, (iii) if there is exclusivity period, (iv) if confidentiality is required, (v) how it is terminated, (vi) which party is responsible for costs, among others.
Our experience shows that negotiations of financial and M&A deals documented in solid TSs save precious time in deal making in Brazil.