Set out key terms early with a heads of agreement

A heads of agreement can be useful when the parties have reached broad commercial alignment but are not ready for the full sale contract. It gives the deal a written framework by recording points like the proposed price, whether the sale is by assets or shares, any exclusivity period, due diligence steps and conditions to proceed. That can help keep negotiations anchored to the same commercial understanding. It is still an early-stage document, not the final transfer agreement, but it often sets the roadmap for what gets negotiated next.

It commonly records the parties, what is being sold, the proposed purchase price, deposit or staged payment arrangements, due diligence timing, confidentiality, exclusivity, conditions to completion and the intended transaction structure. In some deals it may also note handover expectations, restraint concepts or whether third-party consents are expected. One important drafting issue is whether particular clauses are meant to be binding now, while the rest remains subject to the final contract. Completion steps can depend on the company records and any existing shareholder arrangements, especially where a share sale is involved.

The document will usually turn on how far the commercial negotiations have progressed and whether the deal is an asset sale or share sale. It also matters whether payment is upfront or deferred, whether there is vendor finance, what due diligence is still outstanding, and whether any approvals or consents are expected before completion. If the sale involves a company rather than selected assets, company records and any shareholder arrangements can affect how the heads of agreement is framed. Those details help determine what should be locked in now and what should be left for the long-form agreement.

A template may give you a rough starting structure, but business sale deals often need more precision than a generic form provides. For example, a template may not deal well with staged payments, due diligence conditions, exclusivity periods, asset exclusions or the difference between binding and non-binding wording. If those points are left vague, the parties can end up arguing about whether they had a real commitment or only a discussion paper. A tailored document is usually more useful where the sale structure and commercial assumptions need to be reflected accurately.

No. This page is for the heads of agreement only, whether that means drafting a new version or reviewing an existing draft. The final business sale agreement is a separate document with much more detailed provisions around warranties, indemnities, completion mechanics, liability allocation and post-sale obligations. If your matter progresses to that stage, we can discuss separate work for the long-form contract. Tax and accounting consequences may also need separate advice, particularly where the structure of the deal affects how the transaction is carried out.

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