The directors,
however,
considered that
some of the language in the termsheet was too vague – for a deal of this significance they wanted to know what they were getting into before they signed.
Clarifying these points
to everyone’s satisfaction took a couple more weeks of discussions, but eventually the directors pronounced the termsheet language sufficiently detailed on these points.
Having covered their own issues, Wormseye’s directors decided it would be sensible to give other people within the business who would be heavily involved with the joint venture a chance to comment on the terms. The chief technical officer and the head of the project team, among others, weighed in and added some new areas to the termsheet.
Again,
WormsEye were careful to ensure that there was no ambiguity in the language – and as a result the termsheet took several more weeks to agree among all the stakeholders on both sides.
At the end of the process, Wormseye had an agreed 18-page termsheet that covered a substantial proportion of the subject matter of the joint venture. Unfortunately they had taken so long to get there that several external deadlines to have the joint venture implemented were fast approaching. Both sides had run up considerable costs with their advisers, and although the negotiations on the termsheet had not been particularly difficult the partners’ management teams did not have the appetite to get back around the
26 entrepreneurcountry
table and negotiate definitive documents. In fact, Wormseye and their JV partner ended up agreeing not to use definitive agreements at all – they had their lawyers amend the termsheet to reflect that it was now intended to be binding. Of course a year or so later when a dispute arose, the lack of any definitive agreements became a significant issue for both parties.
This example is an extreme one – but it is all too often the case that parties find themselves stuck in the mud at termsheet stage. Time and money spent here does not equate directly to time and money saved when the definitive documents are agreed – certainly some issues will be resolved, but detailed points should be left to be discussed when definitive documents are agreed, otherwise costs will end up being duplicated between stages.
NotSubject Ltd
NotSubject Ltd. entered into negotiations with a software company to provide outsourced training services to that company’s licensees. The
principals conducted the detailed
negotiations, and six weeks later all key terms had been agreed with the aim of proceeding “by the end of this month” and a termsheet to that effect was signed.
NotSubject’s in-
house team was busy on other matters and as a result, no definitive agreements were produced by the start date that had been contemplated. Following that start date, the software company had now decided that it did
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