Sample Term Sheet for an Asset Purchase: A Practical Guide

A term sheet can turn an asset-purchase discussion from a vague handshake into a clear plan. It records the principal business points—what is being bought, for how much, and on what conditions—before the parties spend time and money negotiating a full purchase agreement.

But a term sheet is not a substitute for the definitive agreement. Its wording, governing law, and context can affect whether particular provisions are binding. A well-prepared term sheet therefore does two things: it helps the parties align on the deal and clearly identifies which commitments, if any, take effect immediately.

This guide explains the common terms in an asset-purchase term sheet, offers a sample structure, and highlights issues to resolve before signing. It is general information, not legal or tax advice; asset-purchase rules vary by jurisdiction and transaction.

What Is an Asset Purchase?

In an asset purchase, the buyer acquires specified assets of a business rather than buying the seller’s shares or other ownership interests. Depending on the transaction, assets may include equipment, inventory, intellectual property, customer contracts, real estate, and goodwill.

The parties generally identify which liabilities the buyer will assume and which will remain with the seller. This can give the buyer more control over what is included in the deal, but it does not automatically eliminate legal, contractual, tax, or regulatory exposure. For example, some obligations may follow particular assets, and transferring contracts, permits, or employees may require consent or additional steps.

That makes careful drafting essential: the purchase agreement should describe both what transfers and what does not.

What Is a Term Sheet?

A term sheet—sometimes called a letter of intent or memorandum of understanding—summarizes the key proposed terms of a transaction. It is often used as a roadmap for negotiating the definitive asset purchase agreement.

A term sheet may be:

• Nonbinding in general: The parties express an intention to negotiate, but do not yet commit to complete the sale.
• Binding in part: Certain provisions, such as confidentiality or exclusivity, take effect immediately, while the main purchase terms remain subject to a definitive agreement.
• Binding more broadly: Depending on its language and applicable law, a document labeled “term sheet” or “letter of intent” may create enforceable obligations.

The title alone does not determine its legal effect. The wording and the parties’ conduct matter. If the intention is not to be bound to the sale until signing a final agreement, say so clearly—and identify any exceptions.

Why Use a Term Sheet?

A useful term sheet helps the parties:

1. Surface disagreements early. Price, included assets, assumed liabilities, and timing can be addressed before extensive drafting begins.
2. Set expectations. The parties can agree on a process for diligence, approvals, and closing.
3. Guide advisors. Lawyers, accountants, lenders, and other professionals can use it to prepare more focused drafts and analyses.
4. Protect sensitive discussions. A separate or included confidentiality provision can govern how information is used and disclosed.
5. Avoid false certainty. Clearly stating what remains subject to negotiation can prevent a preliminary discussion from being mistaken for a completed deal.

A term sheet can also create confusion if it leaves major points open, uses inconsistent terms, or says “nonbinding” in one place while making unconditional promises elsewhere.

Sample Asset Purchase Term Sheet

The following is an illustrative starting point only. It is not a complete agreement or a form suitable for every transaction. Bracketed text should be completed, revised, or removed with help from qualified legal and tax professionals.

ASSET PURCHASE TERM SHEET

Date: [Date]
Proposed Buyer: [Buyer’s full legal name and jurisdiction]
Proposed Seller: [Seller’s full legal name and jurisdiction]
Business: [Name and brief description of the business]

1. Transaction Structure

Buyer proposes to purchase from Seller, and Seller proposes to sell to Buyer, the Purchased Assets described below, subject to the terms of a definitive asset purchase agreement (the “Purchase Agreement”).

2. Purchased Assets

Subject to due diligence, the Purchased Assets are expected to include, as applicable:

• Equipment, furniture, machinery, vehicles, and other tangible property listed on an agreed schedule.
• Inventory, supplies, and work in progress, valued and adjusted as set out in the Purchase Agreement.
• Intellectual property, including specified trademarks, domain names, software, copyrights, and related goodwill.
• Customer and supplier records, business records, and other specified books and data, subject to privacy and legal requirements.
• Assignable contracts identified on an agreed schedule, subject to required third-party consents.
• Business goodwill and the right to use specified trade names, if agreed.
• Other assets specifically listed in the Purchase Agreement.

3. Excluded Assets

Unless expressly included in the Purchase Agreement, the following are expected to be excluded:

• Seller’s cash, bank accounts, and cash equivalents.
• Seller’s corporate records and records that Seller is legally required to retain.
• Tax refunds or credits relating to periods before closing.
• Personal property of Seller’s owners or employees.
• Assets listed on an agreed exclusion schedule.
• Any other assets expressly identified as excluded.

4. Assumed and Excluded Liabilities

Buyer will assume only the liabilities expressly identified in the Purchase Agreement (the “Assumed Liabilities”), which are currently expected to include: [describe specific obligations, if any].

All other liabilities will remain the responsibility of Seller, including, subject to negotiation and applicable law:

• Debt and liabilities arising before closing.
• Seller’s income, payroll, and other taxes for pre-closing periods.
• Employee-related liabilities accrued before closing, except as expressly agreed.
• Claims arising from Seller’s pre-closing operation of the business.
• Liabilities relating to excluded assets.

The Purchase Agreement will define the scope of each assumed and excluded liability and include appropriate protections, subject to negotiation.

5. Purchase Price

The proposed purchase price is [amount and currency], subject to adjustments described below and in the Purchase Agreement.

The price is expected to be paid as follows:

• Deposit: [Amount or percentage], payable [when] and subject to [refund/forfeiture terms].
• Cash at closing: [Amount or formula].
• Seller financing: [Amount, interest rate, term, repayment schedule, security, and subordination terms], if applicable.
• Earnout or contingent consideration: [Formula, measurement period, payment dates, reporting rights, and dispute process], if applicable.

6. Price Adjustments and Allocation

The parties will negotiate any closing adjustments, which may include adjustments for working capital, inventory, indebtedness, transaction expenses, or other agreed items.

The Purchase Agreement will set out:

• The calculation methodology and accounting principles.
• The estimated figures used at closing.
• The process for preparing and reviewing final figures.
• The deadline for objections and a mechanism for resolving disputes.
• The allocation of the purchase price among asset classes for applicable tax and accounting purposes.

7. Due Diligence

Buyer’s proposed transaction is subject to satisfactory due diligence, including review of financial, tax, legal, operational, employment, environmental, intellectual-property, customer, contract, and regulatory matters, as relevant to the business.

Seller will provide reasonable access to information and personnel, subject to confidentiality, privacy, competition-law, and other applicable restrictions.

8. Conditions to Closing

Closing is expected to be subject to customary and transaction-specific conditions, which may include:

• Completion of due diligence to Buyer’s satisfaction, if agreed.
• Execution and delivery of the Purchase Agreement and related documents.
• Receipt of required governmental, regulatory, landlord, lender, and third-party consents.
• Assignment or replacement of specified contracts and permits, as applicable.
• Accuracy of agreed representations and warranties at closing, subject to negotiated standards.
• Performance of agreed pre-closing obligations.
• No occurrence of a defined material adverse event, if included.
• Completion of financing, if the transaction is financing-dependent.
• Delivery of bills of sale, assignments, certificates, and other transfer documents.

9. Interim Operations

Between signing the Purchase Agreement and closing, Seller will operate the business in the ordinary course, subject to agreed exceptions and restrictions. The Purchase Agreement may address actions requiring Buyer’s consent, such as significant asset sales, unusual contracts, changes in compensation, or incurrence of material debt.

10. Employees and Transition

The parties will discuss whether Buyer will offer employment to any current employees and how employee-related obligations will be handled. Any offers, transfer arrangements, accrued compensation, benefits, and required notices will be documented in definitive agreements and handled in accordance with applicable law.

If agreed, Seller or specified personnel will provide transition services for [period] under a separate agreement covering scope, fees, availability, confidentiality, and termination.

11. Representations, Warranties, and Indemnification

The Purchase Agreement is expected to contain negotiated representations, warranties, covenants, and indemnification provisions. The parties will discuss any limits on indemnification, including:

• Survival periods.
• Deductibles, thresholds, and caps.
• Exclusions from limitations.
• Escrow, holdback, or other security.
• Procedures for notice, defense, and settlement of claims.
• Any insurance intended to respond to specified risks.

12. Restrictive Covenants

The parties may agree to reasonable restrictions concerning competition, solicitation, confidentiality, or use of the business’s name and information, subject to applicable law and the terms of the Purchase Agreement.

13. Confidentiality

The parties will keep confidential nonpublic information exchanged in connection with the proposed transaction and use it only to evaluate, negotiate, or complete the transaction, subject to any existing nondisclosure agreement and permitted disclosures to advisors, financing sources, or as required by law.

Binding status: [State whether this section is intended to be binding and how it interacts with any existing confidentiality agreement.]

14. Exclusivity

For a period of [number] days after [date/event], Seller will not solicit, encourage, or enter into discussions or agreements concerning a competing sale of the business or Purchased Assets, subject to the terms of a definitive exclusivity provision.

Binding status: [State expressly whether this section is intended to be binding.]

15. Costs and Expenses

Each party will pay its own legal, accounting, advisory, and other costs, except as expressly agreed in writing.

16. Governing Law and Dispute Resolution

[Specify governing law and any agreed dispute-resolution process for provisions intended to be binding.]

17. Nonbinding Effect; Binding Provisions

Except for Sections [list any binding sections, such as confidentiality, exclusivity, expenses, governing law, and dispute resolution], this term sheet is a statement of proposed terms for discussion only. Neither party is obligated to complete the transaction unless and until the parties execute and deliver a definitive Purchase Agreement and satisfy its conditions.

No party may rely on this term sheet as a commitment to sell or purchase the assets, except as expressly stated in any binding provision. The parties should obtain legal advice on whether this language achieves the intended result under the applicable law.

18. Expiration and Signatures

This proposal will expire at [time and date] unless accepted in writing by both parties. Any provision intended to be binding will be effective only as stated in this term sheet.

PROPOSED BUYER: ____________________ Date: __________

PROPOSED SELLER: ___________________ Date: __________

Key Terms to Negotiate Carefully

1. Exactly Which Assets Transfer?

Avoid relying on a broad phrase such as “all assets used in the business.” Prepare schedules that identify important assets and clarify treatment of shared, leased, obsolete, or third-party-owned property.

Intellectual property deserves special attention. Confirm who owns it, whether it is registered, whether it is subject to licenses or security interests, and whether the relevant registrations or accounts can be transferred.

2. Which Liabilities Does the Buyer Assume?

A buyer should not assume liabilities accidentally through vague wording. The definitive agreement should specify assumed liabilities and excluded liabilities, and the parties should consider whether particular obligations—such as customer deposits, warranties, deferred revenue, or employee accruals—need special treatment.

Contract language is only part of the analysis. The parties should also investigate statutory, regulatory, employment, environmental, tax, and successor-liability issues that may apply to the transaction.

3. How Is the Purchase Price Calculated?

A stated price may not be the final amount paid. The deal could include working-capital adjustments, inventory counts, holdbacks, seller financing, earnouts, or post-closing payments.

For each adjustment, define the formula and process. Specify which accounting principles apply, who prepares the calculation, how long the other party has to object, and how unresolved disputes will be decided. “To be determined after closing” is a recipe for avoidable disagreement.

4. What Happens to Contracts, Permits, and Leases?

Many contracts cannot be assigned without consent, and some licenses or permits may not transfer at all. Identify critical agreements early. If a required consent is unavailable, the parties should decide whether the transaction can proceed, whether a substitute arrangement is acceptable, or whether the affected asset is a condition to closing.

5. How Will Employees Be Handled?

Employee transfers can involve wage, benefits, notice, consultation, pension, immigration, and accrued-leave issues. The parties should establish who will make offers, when employees will be notified, and how pre-closing obligations will be allocated. Local employment law may impose requirements regardless of what the parties agree.

6. What Protections Apply After Closing?

Representations and warranties describe agreed facts about the business and assets. Indemnification provisions determine whether and how one party can recover losses if those statements prove inaccurate or a specified obligation arises.

The parties should negotiate the details—not simply insert “customary indemnification.” Caps, baskets, survival periods, exclusions, escrow arrangements, and claims procedures can materially affect the value and risk of the deal.

Common Term Sheet Mistakes

• Treating “nonbinding” as a magic phrase. Make the intended legal status clear for each provision, especially confidentiality, exclusivity, and expenses.
• Leaving the asset list vague. Ambiguity about equipment, inventory, intellectual property, or customer relationships can create disputes.
• Ignoring assumed liabilities. A general promise to buy “the business” does not answer which obligations transfer.
• Skipping the price-adjustment mechanics. A formula without definitions or a dispute process may not be workable.
• Overlooking third-party consent. A key contract or lease may not transfer automatically.
• Using an unrealistic exclusivity period. A buyer may need enough time for diligence, but a seller may not want to lose other opportunities indefinitely.
• Forgetting tax and regulatory analysis. Asset classification, transfer taxes, sales or value-added taxes, and reporting obligations vary by jurisdiction and transaction structure.

Sources and Further Reading

The following materials provide general background on purchase agreements and transaction documentation. They are not substitutes for advice specific to a proposed deal:

1. American Bar Association, Business Law Section, resources on mergers and acquisitions and business transactions: americanbar.org/groups/business_law
2. Internal Revenue Service, Publication 544: Sales and Other Dispositions of Assets, covering U.S. federal tax concepts related to asset dispositions: irs.gov/publications/p544
3. Internal Revenue Service, Form 8594 and Instructions, concerning reporting an applicable asset acquisition for U.S. federal tax purposes: irs.gov/forms-pubs/about-form-8594
4. U.S. Small Business Administration, guidance on buying an existing business: sba.gov/business-guide/plan-your-business/buy-existing-business-or-franchise

Tax forms and guidance are specific to the United States; other jurisdictions have different rules and filing requirements. The tax treatment of a particular transaction should be confirmed with a qualified tax professional.

Conclusion

A strong asset-purchase term sheet is concise enough to guide negotiations but detailed enough to expose the major business and legal questions. It should describe the assets, excluded property, assumed liabilities, price and adjustment mechanics, diligence, closing conditions, and any binding preliminary commitments.

Most importantly, it should distinguish clearly between proposed terms and enforceable obligations. Before signing, both sides should review the document with qualified legal and tax advisors familiar with the transaction and applicable law. A careful term sheet cannot eliminate every risk, but it can help the parties find the risks early—and negotiate the definitive agreement with fewer surprises.

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