Tips for preparing an effective set of heads of terms

Heads of terms can be a useful tool in the sale and purchase of a business. Here are our top tips for achieving a useful set of heads of terms efficiently:

• Stick to commercial terms only;
• Keep them short and to the point;
• Speak to a lawyer as early on in the process as possible and certainly before signing anything;
• Involve your accountant and/or corporate advisor in the process;
• If using a precedent, ensure it is for the right type of transaction, eg a share sale or asset sale, and use it as a guide rather the precedent dictating the terms;
• Do not overcomplicate terms unnecessarily – often the simpler solution is the better one;
• Be clear on which terms, if any, are to be legally binding; and
• Check that you have covered all the key points.