The Exit Toolkit · Sheet 6 of 20
Heads of Terms: the anatomy
What HOTs really cover, and which parts bind you
The deal itself
What is being sold (shares or assets), the price, how and when it is paid, and any price adjustment mechanism such as completion accounts or an earn-out.
Conditions
Usually 'subject to satisfactory legal, financial, tax and commercial due diligence'. The buyer's assumptions from your sales information are often recorded too.
Timetable and process
Who drafts the sale agreement and by when, key terms it will contain, and the route to completion.
Exclusivity: binding
You agree not to talk to other buyers for a period. This is normally legally binding, and it shifts negotiating power to the buyer the moment you sign.
Confidentiality: binding
Keeps the deal and each side's information private, usually linking back to the NDA.
Costs
Each side normally pays its own. Watch for clauses making you liable for the buyer's costs if you pull out.
Bottom line
HOTs are mostly moral force rather than legal force, but they set the deal in concrete socially. Negotiate hard before you sign, because once the buyer has exclusivity it is much harder to improve the terms. Agree as much as you can while you still have competition.
General information only, not legal advice. Steven Mather Solicitor is a trading name of Kesters Nook Limited; legal work is carried out through Nexa Law Limited, authorised and regulated by the SRA (number 633024).