Important Elements to Include in a Term Sheet for a Chinese Licensing Deal
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Young start-ups and entrepreneurs often get frustrated when they approach me about advising them on a deal and I ask them for a term sheet, and then encourage them to write one if they don't already have one. However, when I ask this question I do it not with the intention of frustrating my client's progress on the deal or discouraging my client from doing the deal altogether--I do it to make sure that we are not spending their limited resources on negotiating a deal that they aren't going to close. This is particularly important when the transactions appears to involve many sizeable documents or any complicating factors, such as the other party being located in a foreign country. Why? Well, these deals tend to be expensive to negotiate and draft, and so I don't want my client to start generating large bills before confirming that a deal is likely to be reached.
Deals with China definitely fall in the category of complicated transactions. In my career, I have represented clients on several large China transactions and none have been fast or easy to negotiate. This article in Forbes linked below provides some excellent advice to anyone contemplating a licensing transaction in China about items that should be covered in the term sheet before negotiations get underway:
