BEYOND THE TERM SHEET: WHO WILL GET YOUR DEAL TO CLOSING
Introduction
Raising investment or going through an M&A transaction is a project. And like any project, it can be straightforward and predictable — or long, stressful, and full of surprises.
As a founder, your goal is often to get through the deal quickly and with minimal distraction from day-to-day business operations.
As an investor, your priority is to build a reliable legal structure, lock in key obligations, and mitigate risks.
In reality, deals rarely progress on autopilot. Delays in feedback, mismatched document versions, extended due diligence, and conflicting interpretations of the term sheet are all common. This leads to friction and stalls in progress.
In such moments, it's vital to have someone who can maintain momentum, coordinate communication, eliminate bottlenecks, and keep sight of the deal's trajectory — from start to close. This is usually the role of the lawyer. Each side has their own, but both must not only protect their client’s interests, but also drive the deal forward. Crucially, this works only when the lawyers are more than a document drafters — they must be a deal coordinators. This article is about that.
You'll learn:
- How deals progress in practice from term sheet to post-closing
- What challenges arise at each stage
- How a well-structured process saves time, resources and reduces stress — for both founders and investors
The Term Sheet: Skimp on attention now — pay for it later
Many founders see the term sheet as a rough draft — a couple of pages reflecting a verbal agreement, with details to be added to the SHA later. In practice, the term sheet lays the entire foundation for the deal — and most problems that arise later stem from issues here.
It’s not just about valuation and investment amount. The term sheet defines structure: how the deal is set up, how investor participation is documented, the parties’ rights and obligations, exit mechanisms, and closing logistics. These must be clearly articulated and legally workable. If not, the deal may stall or trigger frustration and confusion.
💡 CASE IN POINT
In one deal, the investor insisted on a drag-along right in the term sheet without verifying whether it could be legally enforced under the existing shareholding structure. The company’s lawyer noticed that some minority shareholders weren’t party to the SHA, meaning their consent wasn’t formally required. To avoid a deadlock, the lawyer proposed limiting the drag-along obligation to signatories of the SHA, while persuading others to sign mirror agreements post-investment. This avoided delays and preserved deal momentum.
A competent lawyer acts not as a brake but as an architect, converting business logic into legal structure. The more thorough the term sheet, the smoother the rest of the deal.
Due Diligence: Not just risk spotting — but risk managing
Due diligence is often seen as a formality: collect documents, check, report. In truth, it’s where deals either gain traction or start to unravel.
How to approach it: transparency, prioritisation, open communication
The investor needs clarity on the company’s legal standing and exposure. The founder wants to avoid a prolonged, stressful distraction. The efficiency of this phase hinges on process structure: clear tracking, prioritised risks, and prompt feedback.
What’s often overlooked is the value of responding quickly and openly — clarifying context, tracking issues, and flagging red flags. If a document might trigger concerns (an unusual contract, outdated clause, or missing signature), don’t just drop it in a folder — add a cover note explaining context, risks, and mitigation plan.
Attempts to obscure issues or delay answers typically backfire — eroding trust and delaying the deal.
How to triage risk and stay focused
Risks are usually categorised:
- Critical (red flags) — potential deal breakers
- Medium (yellow flags) — need to be resolved or addressed in the SPA
- Minor (informational) — can be dealt with post-closing or kept in mind
The lawyer’s role here is to convert a pile of documents into a clear map: what needs resolving now, what goes into the SPA, what can wait. This aligns the parties’ views on risk and avoids subjective bias.
💡 CASE IN POINT
In a fintech deal, investor lawyers spotted missing IP transfer agreements for two key contractors who had previously worked as freelancers. This cast doubt on the company’s IP ownership. The company’s legal team swiftly got one of the contractors (who had developed core code) to sign before closing. The other was unavailable, so a post-closing covenant was added to the SPA requiring signature within 30 days. This avoided delays, addressed the risk, and kept relations constructive.
The goal of due diligence isn’t to find the “perfect company”, but to reach a shared understanding of the real state of affairs — and how to handle it.
Documentation: Turning terms into legal architecture
After due diligence, it’s time to draft the key documents: SHA, SPA, Disclosure Letter, consents and approvals. This is where verbal agreements become legal commitments — and where misinterpretations often emerge.
Common friction points:
Disagreements over investor rights, approval thresholds, exit terms, IP transfers, and option schemes. These require precision and shared understanding.
Why structure matters
Without a project-managed approach, the process unravels: multiple document versions, communication delays, scattered discussions. Timelines slip, frustration builds.
Managing side documents
There’s also a host of secondary paperwork: powers of attorney, consents, disclosure schedules, filings, notifications. These are often created by different people on different timelines. To manage them:
- List all required side documents.
- Assign responsibilities and deadlines.
- Regularly update their status.
This is crucial when multiple jurisdictions or investor requirements are involved.
Here, the lawyer must ensure:
- Consistent wording across documents
- Deal logic is accurately reflected
- Documents progress in sync
- Everyone understands the implications
💡 CASE IN POINT
In one deal, the term sheet had a liquidation preference clause. But the parties interpreted it differently: the investor assumed it applied to any exit, the founder thought it was limited to liquidation. Lawyers created a comparison table outlining scenarios (liquidation, M&A, partial sale) and consequences. The parties agreed on investor protection in liquidation and a softer approach for exits. This resolved the issue constructively and kept the deal on track.
Closing: The final act where mistakes still happen
Even if all deal terms are locked in, closing can go off track.
What might go wrong:
- Signatures & readiness — A key signatory is away, ill, or uninformed. Third parties (e.g. contractors, registrars, banks) aren’t ready or haven’t been briefed.
- Payments — Currency control issues, wrong bank details, missing compliance checks. Funds might get blocked at the last minute.
- Tech details — Wrong document versions, unprinted files, unsigned code, unreleased access credentials.
A well-run closing follows a pre-agreed script with checklists and timelines:
- Who does what and when
- Step-by-step order of execution
- Conditions for pre-closing, at-closing, post-closing
- Confirmation protocols and recipients
All of this is tracked centrally, synced with calendars, and stored in a shared system.
The lawyer here is the deal conductor:
- Verifying conditions are met
- Sequencing steps (parallel vs. sequential)
- Checking documents, signatures, payment status
- Managing the checklist and troubleshooting in real time
- Identifying and documenting post-closing items
💡 CASE IN POINT
In a cross-border deal, a local bank refused a euro payment the day before closing due to a sudden compliance policy change. Documents were signed, but the deal was at risk. The lawyer proposed re-routing the payment via a friendly account in another jurisdiction, added a new SPA schedule confirming the source of funds, and salvaged the deal on schedule — with no trust lost.
What keeps chaos at bay:
- Individual checklists for each participant
- Real-time communications (group call/chat)
- Pre-tested access and signatures
- Backup plan for last-minute issues (e.g. post-closing workaround)
Post-closing: Don’t leave loose ends
Once the money lands, teams often relax — but the deal isn’t quite done.
Post-closing tasks include registrations, IP assignments, third-party notifications, deferred conditions, option schemes. These often get overlooked.
If left unmanaged, such gaps can cause legal issues during the next round or exit — unresolved obligations, unfiled documents, or stakeholder misunderstandings can come back to bite.
A diligent lawyer sets up a post-closing tracker, monitors deadlines, and helps guide the team through this final phase.
💡 CASE IN POINT
In one deal, the team failed to update company registry data. When a future investor’s lawyers spotted the inconsistency two months later, it raised a red flag. It was fixed in two days, but caused a month-long delay in the next investment phase.
Final thoughts: The lawyer as deal driver
A well-run deal is a predictable, controlled process.
For founders — less stress, fewer distractions, more clarity.
For investors — transparency, risk management, and discipline.
A lawyer who doesn’t just draft documents but manages the transaction as a project is essential. They see the full picture, keep pace, resolve roadblocks, and ensure every phase runs on time and to standard.
Exactly what both sides need.
5 Key Takeaways:
1. The Term Sheet is the deal’s architecture — not a draft
Early mistakes are costly. Get your lawyer involved upfront.
2. Due diligence is a filter — not a fault-finding mission
Well-run audits and open dialogue build trust.
3. Documentation is about alignment — not just legalese
It’s not just what’s written — it’s how both sides interpret it.
4. Closing is a technical operation — not a formality
Delays often stem from minor issues. The lawyer here acts as a project manager.
5. Post-closing is responsibility — not an afterthought
Neglected follow-ups can jeopardise the next deal round.