Justfactsman... Good points herein. DD on science is likely already done. What is likely to remain is DD on legal related issues before signed term sheet can move to signed agreement.
In Reply to 'Justfactsmam'
What is the confusion?
1. WHEN: "The Company signed a non-binding Term Sheet in August, 2018 (30-45 days ago)...
2. SUBJECT MATTER: For Licensing/Rights to Brilacidin...
3. TERMS TO BE NEGOTIATED: "Initial payments, milestone payments and royalties are being negotiated in accordance with the non-binding term sheet"
4. Further DUE DILIGENCE...and when Due Diligence is satisfied or not...BP will either enter into an anticipated "Binding Definitive Agreement" based upon the terms and conditions on agreed upon, or it will state that it will not and parties will go their own ways.
Non-Binding "Term Sheet" ... doesn't segway into a Binding Term Sheet...it transforms into a "Binding Definitive Agreement" upon which the parties close the deal.
I am representing two companies right now anticipating their sale to an Acquirer (both of whom are Public Companies). They are not in the same industry, but the order of the transaction was the same.
The larger is for $110-150MM. Seller first received from the Suitor a "Letter of Interest" (one year ago!) outlining financial terms of an acquisition based upon a multiple of a pro-forma (hypothetical) Ebitda. When the Suitor received an oral indication by seller of interest in going forward with a Letter of Intent (LOI)...Suitor send a "Letter of Intent" (60 days ago) or you can say a "Non-Binding Term Sheet". The Term Sheet gave the Suitor 90 days to complete Due Diligence (confirmation of material facts) and to negotiate final terms and conditions. It was "Non-Binding" to the extent that there is no "meeting of the minds" of all the material terms are agreed upon which to draft a "Binding Definitive Agreement" to be executed.
During this DD time period, both parties are bound to negotiate in good faith, and continue to NOT DISCLOSE or DISCUSS NEGOTIATIONS to Public, nor NEGOTIATE with anyone else.
There appears to be an assumption that the additional DD has to do with "the Science". A huge "false assumption"...though never say never. There could be elements of that...but unusual and highly unlikely.
...FINAL DUE DILIGENCE and CONFIRMATION OF MATERIAL FACTS...is always the last step. The Additional Due Diligence needed would be in the Term Sheet. It likely has to do with proving ownership of patents, authority to enter into agreements etc. ALL legal is not done before the Scientific DD and is the last thing done. This is necessary so that once a deal is firm (all Scientific DD satisfied)...Acquirer knows that it really "owns" the rights to what they "bought".
Generally DD 60-90 days. Generally it is no longer than 90 days (neither party wants to have its hands tied) unless issues arise and have to be corrected or further satisfied. (In the $110MMM plus deal...will take another 60 Days to confirm all legal issues.)
In the two I am working on right now...both parties are bound and must to negotiate in "Good Faith" and have 90 days to do so. If DD is completed earlier...they will close earlier.
In the $110MM deal...the will execute the final "Binding Definitive Agreement" (in this case "Asset Purchase Agreement" (APA)) and close virtually the next day, confirm agreed to numbers or even the same day.
On the smaller LOI, the Seller was contacted by a Competitor and offered substantially more to the Seller than the Suitor with whom he signed the LOI. He had to tell the competitor that he could not discuss the Competitors proposal with him...even after blurting out the number.
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