Module 2 · Chapter 4

From Term Sheet to Signing

A buyer must pay the price whether or not its banks lend. So the loan is committed before the purchase contract is signed, and the lenders keep very few reasons to refuse.

≈ 12 min read 8-question test

In this chapter

  • Why the loan is committed before the purchase is signed
  • What the mandate letter, the term sheet and the fee letters do
  • How certain funds and the clean-up period protect the buyer

4.1Certain funds in one paragraph

A buyer signs the share purchase agreement (SPA) first and pays the price at completion, often months later. In Europe a seller will almost never accept a financing condition, a term that lets the buyer walk away if its loan falls through. So the buyer must pay whether or not its banks lend, and is in breach if the money is missing. The buyer therefore needs certain funds: a loan committed before the SPA is signed, which the lenders can refuse to fund only for a few serious reasons.

Key point

Never sign the SPA until the loan is committed. Between signing and completion, the lenders may refuse to fund only for the few reasons the loan itself lists.

Also in this chapter

  1. Two ways to commit the loan before signing
  2. The mandate letter hires the arranger
  3. The term sheet becomes the agreement
  4. Why some fees sit in a separate letter
  5. Very few reasons to refuse the money
  6. Ninety days to fix the target's problems
  7. Selling the loan after signing
  8. Your job

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