Guide to Selling Your Business
Heads of Agreement
Once agreement in principle has been reached with a preferred purchaser a “Heads of Agreement” is likely to be entered into between the sellers and the purchaser. This is a document that is largely “subject to contract” – i.e. it is not binding in itself but sets out the parameters of the main terms of the agreement in principle that has been reached.
These terms are likely to include the following:
The main agreement as to price – e.g. in terms of cash, shares or loan note payments, including details of any “earn-out” or other forms of variable or deferred payments.
A clause providing that the purchaser will be given a period of exclusivity (for, say, two months) during which the sellers agree not to discuss or negotiate a sale with any other potential purchaser.
Details of any non-competition restrictions to be entered into by the sellers in relation to a period of time following completion of the sale.
Arrangements for a detailed “due diligence” process to be undertaken by the purchaser to satisfy itself, so far as it is able to do so, that there are no unidentified problems attached to the business being sold.