Conditionality in Acquisition Financing Commitment Papers

Summary

This practice note provides an overview of conditionality in acquisition financing commitment papers. The commitment letter, term sheet, and attachments are the starting point of the definitive credit documentation and the drive to closing. Borrowers and lenders will use a commitment letter and term sheet to negotiate the most important and contentious aspects of the financing before expending the time and resources necessary to fully negotiate the definitive documentation. An acquisition financing adds a particular tension to the commitment process – specifically, the borrower's need to have funds available quickly when it closes its acquisition against the lenders' need to complete its diligence process and have comfort that certain basic conditions are met. This practice note discusses this tension and how borrowers and lenders typically agree to certain standard provisions that fills both needs.