Business Acquisition Term Sheet Template for Canada

A Business Acquisition Term Sheet is your roadmap for navigating complex mergers and acquisitions in Canada. This preliminary document captures the essential commercial and legal terms that you and the other parties have negotiated, serving as the foundation for due diligence and drafting definitive purchase agreements. While most provisions are non-binding, the term sheet demonstrates serious intent and helps prevent misunderstandings as your transaction progresses.

When do you need this document?

You need a Business Acquisition Term Sheet whenever you're involved in buying or selling a Canadian business and want to memorialize agreed-upon terms before investing in expensive due diligence. This document is essential when you're structuring asset purchases, share acquisitions, or mergers where the purchase price exceeds $400 million or meets other Competition Act thresholds. You'll also need it when foreign buyers are acquiring Canadian businesses that may trigger Investment Canada Act review requirements, or when either party is publicly traded and provincial securities regulations apply. The term sheet becomes particularly valuable in competitive auction processes where sellers want certainty on key terms before granting exclusivity periods.

Key legal considerations

Your term sheet should clearly define the transaction structure, whether it's an asset purchase, share acquisition, or statutory merger, as each has different tax and legal implications under Canadian law. The purchase price mechanism requires careful attention, including any working capital adjustments, earnout provisions, or escrow arrangements that protect both parties. Representations and warranties sections should outline the scope and survival periods, while indemnification clauses need to specify caps, baskets, and excluded matters. Due diligence provisions should establish timelines and access rights, particularly for reviewing material contracts, employment agreements, and regulatory compliance. Confidentiality and exclusivity clauses are typically binding and enforceable, so ensure these terms align with your negotiating strategy and timeline expectations.

Legal requirements in Canada

Canadian business acquisitions must comply with federal Competition Act requirements if they exceed monetary thresholds or substantially lessen competition in any market. Your term sheet should address whether Competition Bureau notification is required and allocate responsibility for filing fees and timing. The Investment Canada Act governs foreign acquisitions of Canadian businesses, with different thresholds for WTO investors versus non-WTO investors, and your term sheet should identify any applicable review requirements. Provincial securities laws apply when either party is publicly traded or when securities form part of the consideration, requiring compliance with disclosure and regulatory approval processes. Corporate law requirements under the Canada Business Corporations Act or relevant provincial statutes must be considered for shareholder approvals, director resolutions, and procedural requirements for completing the transaction structure outlined in your term sheet.