Record the headline sale terms before the full transaction documents are negotiated

A heads of agreement is often useful once the parties have discussed the broad commercial deal and want that position recorded before spending more time and money on the full transaction documents. It can set out the proposed structure, headline price, payment approach, exclusivity and key conditions in one place. That gives both sides a clearer reference point for the next stage. It is not a substitute for the main sale agreement, but it can help show what has been agreed already and what still needs to be worked through before completion.

Common points include who the buyer and seller are, whether the deal is structured as a share sale or asset sale, the proposed price, how payment is to be made, any deposit or deferred amount, key conditions, confidentiality, exclusivity and the expected timetable. Depending on the deal, it may also refer to due diligence, staff issues, transitional arrangements or completion assumptions. Some clauses may be intended to be binding while others are only statements of commercial intent, so the wording matters if you want the document to reflect the stage and purpose of the negotiations properly.

The content depends on how far negotiations have progressed and how much detail the parties want to lock in now. A simple deal with an agreed price and structure may only need a concise outline, while a transaction involving staged payments, conditions, earn-out points or access to sensitive information may need more careful wording. It also matters whether you are buying or selling, and whether the transaction involves a company, selected assets or a mix of both. Completion steps can depend on the company records and any existing shareholder arrangements, so those details can affect the drafting.

Templates can be useful for organising commercial discussions, but they often miss the detail that matters once a real deal starts moving. A short document can still create confusion if it is unclear on exclusivity, confidentiality, deposits, conditions or whether a clause is meant to be binding. That can become important later when the parties move into due diligence and the main agreement. A drafted heads of agreement is usually more useful where the transaction structure is still being refined, the payment terms are not straightforward, or one side wants the early deal terms recorded more carefully.

If the main commercial points are already reasonably settled, a first draft can often be prepared within a few business days. After you review it, amendments can be made so the document better reflects the current negotiations. Once the heads of agreement is in place, the next stage is usually due diligence and preparation of the main transaction documents, such as an asset purchase agreement or share purchase agreement. Tax and accounting consequences may need separate advice at that point, particularly if the structure or payment mechanics have wider implications.

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