Scenario 01

---
name: identify-counterparty-term-sheet-issues-scenario-01
task_id: corporate-ma/identify-counterparty-term-sheet-issues/scenario-01
description: Guides preparation of a seller-side prioritized issues memo identifying material problems in a buyer's proposed non-binding M&A term sheet, cross-referenced against deal documents and market data at a category level.
activates_for: [planner, solver, checker]
---

# Skill: Seller-Side Term Sheet Issue Identification

## 1. Subject-matter triage
- Treat the assignment as a seller-side review of a proposed non-binding M&A term sheet plus supporting deal materials.
- Separate business terms from binding legal terms before analyzing anything else.
- Identify all parties, versions, and deal documents in scope, then confirm whether there is only one operative term sheet or multiple drafts to compare.
- If the source set includes financial summary, diligence findings, or comparable transactions, use them as the factual baseline for valuation and risk-allocation analysis.

## 2. Failure modes the skill is correcting
- Valuation concerns are stated as generic objections without anchoring them to the company’s financial profile, market comparables, or diligence findings.
- The memo reads as a flat issue dump rather than a prioritized seller-side negotiation brief.
- Risk-allocation terms are judged against abstract market norms instead of the specific transaction profile and source materials.
- Exclusivity and no-shop terms are criticized without testing duration, scope, exceptions, and fit with the signing timetable.
- Binding provisions are not isolated from non-binding points, causing the memo to overstate or understate enforceability.
- Issue descriptions stop at identification and do not close the loop on scale, interaction with other terms, and downstream consequence.
- Recommendations are vague, untethered to roles or timing, or disconnected from the transactional milestones in the record.

## 3. Legal frameworks / domain conventions that apply
- Non-binding term sheets: identify which provisions are expressly binding and which are indicative only; analyze binding provisions separately and avoid treating commercial points as enforceable unless the document says so.
- Valuation assessment: test the proposed economics against the company’s financial performance, market comparables, and diligence findings; flag seller-unfriendly adjustments, discounts, or contingencies that are not supported by the record.
- Purchase-price mechanics: treat working capital, debt, cash, leakage, and similar adjustments as core economics; assess whether the baseline, measurement method, and true-up process are seller- or buyer-favorable.
- Risk allocation: evaluate indemnity basket, cap, survival, exclusions, escrow, holdback, and related qualifiers as a linked package rather than isolated clauses.
- Earnouts: assess metric choice, operational covenants, anti-manipulation protections, information rights, acceleration, and dispute resolution as a single framework.
- Exclusivity: assess whether the duration and permitted exceptions are narrowly tailored to the diligence and signing process, especially in a competitive process.
- Representation scope: flag overly broad, open-ended, or drafting-ambiguous statements as indicators of where the definitive agreement may become more aggressive.

## 4. Analytical scaffolds
- Read the term sheet provision by provision from the seller’s perspective and classify each point as economics, risk allocation, process, or drafting.
- For valuation points, compare the proposed price and adjustments against the company materials and any market data in the source set.
- For diligence-dependent points, tie the proposed term to the diligence finding it is said to address; if no factual hook exists, treat the point as buyer-favorable overreach.
- For exclusivity, ask whether the period, carve-outs, and process obligations preserve meaningful run-time for alternatives and signing.
- For each issue, state the concern, the seller-side revision, and the basis in the source materials or generally recognized M&A practice.
- When the analysis admits multiple parties, phases, or term variants, enumerate them first and analyze each separately rather than using a generic pass.
- Avoid unsupported legal conclusions; when a legal proposition is invoked, name the controlling authority, statute, rule, or generally recognized doctrine that supports it.
- Keep the memo focused on negotiation leverage: distinguish points that affect headline economics from those that mainly shape downside protection or drafting hygiene.

## 5. Vertical / structural / temporal relationships
- Track how a point in the term sheet interacts with the definitive agreement, disclosure schedules, diligence materials, and signing-to-closing timeline.
- If a term depends on later documentation, note the dependency and identify the risk of adverse drift at the definitive-agreement stage.
- Analyze process terms in temporal sequence: diligence, exclusivity, signing, closing, post-closing claims, and any earnout or adjustment period.
- Where one clause changes the practical effect of another, state the interaction explicitly rather than treating the clauses in isolation.
- If only one operative transaction scenario exists, say so affirmatively and proceed on that basis.

## 6. Output structure conventions
- Produce a single prioritized issues memorandum in the seller’s voice.
- Start with a short executive summary that states the overall assessment and the highest-priority negotiation points.
- Define an ordinal severity scale once at the top and apply it consistently to every issue.
- Organize the body by severity, not by document order, so the memo naturally foregrounds the most material seller-side problems.
- For each issue, include:
  - severity;
  - the issue;
  - why it matters to the seller;
  - the recommended revision;
  - the support from the term sheet and related deal materials;
  - the relevant controlling authority, rule, or market convention if a legal proposition is being stated;
  - the issue’s scale or practical magnitude using facts from the source set;
  - any cross-reference to another clause or document that affects the point;
  - the downstream consequence if left unchanged.
- End with a concise Recommended Actions section that assigns the next step to the relevant role and ties it to the signing, diligence, or drafting milestone.
- Use conventional memo language rather than a checklist format; do not mirror any hidden rubric section headings.
- Keep the writing concise, negotiation-oriented, and decision-ready.