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Buying or selling a business? It pays to agree key terms upfront

30th July 2018

Buying or selling a business? It pays to agree key terms upfront

Adrenalin may be running high if you are on the verge of buying a business or selling the company you have built from scratch.  You may have already sought professional advice regarding the company valuation but there are other critical issues on which advice will also be needed during those early heady days of negotiations, as the corporate lawyers at Myers and Co Solicitors in Stoke on Trent explains.

‘To aid the smooth progress of a business sale or acquisition it is advisable to agree the key terms of the deal first, together with the mechanics of how the deal with be done. These should be set out in a heads of terms document which will act a road map for dealing with all the stages you will need to go through to conclude the deal you have negotiated.’

Heads of terms are not legally binding but they represent an agreement in principle about how matters ought to be handled. They also demonstrate a serious commitment to commence the process as soon as possible and to ultimately conclude the transaction.

Terms to be included

The range of topics covered in the heads of terms will vary depending on the nature of the transaction, but the process of buying or selling a business has many stages and so it is usual for certain key matters to be addressed, including:

Exclusivity arrangements

An issue that almost always arises when heads of terms are being discussed is exclusivity arrangements to guarantee that, for a set time, the seller will not enter negotiations with anyone else.  This is to give the buyer a degree of assurance that, while preliminary issues are being dealt with and costs are being incurred, the seller will not engage in parallel negotiations with another party who may be waiting in the wings.

It is important to ensure that an exclusivity agreement is legally binding.

Liability for misrepresentation

While the heads of terms themselves are not intended to be binding, it is important to be aware that any statements made as part of the negotiation process or provided in response to requests for information could be deemed to be representations.  Inaccurate representations could expose you to a claim for misrepresentation or negligent misstatement, which may leave you liable to pay compensation or could cause the deal to fall apart.

To reduce the risk of this happening, the sale or purchase documents will need to include a provision defining the statements that should and should not be relied upon and in any event limiting liability for misrepresentation to the extent possible.

For further advice on agreeing heads of terms or any other corporate or commercial matter, please contact us 01782 525000 or email info@myerssolicitors.co.uk


The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.