Advice on Selling a Business - the Heads of Terms Document

Typically there will be 3 or 4 possible buyers who will wish to take matters further. They will wish to meet the owner and to visit the business. We will make these arrangements and normally attend the first meeting. Buyers will be aware of the need for confidentiality and can be expected to cooperate with the owner's reasonable wishes in this regard. This may be as simple as agreeing a suitable ‘cover’ (eg prospective customers) or, in extreme cases, the visit can be arranged ‘out of hours’.

Usually, if a sale is going to result, buyer and seller will need to ‘get on’. Typically, once the first meeting has taken place, we can slide into the background whilst the 2 parties get to know one another. Often during this process, the buyer will ask for additional information to enable them to frame an offer. Ideally, of course, there will be more than one buyer at the same time.

Once buyers are ready to make an offer they will either wish to sit down to negotiate or they may prefer to submit an ‘opening bid’ in writing. At this stage we should be involved to take as little or as much responsibility for the negotiations as the owners wish.

The end result of the negotiations is a Heads of Terms document. This is a memorandum of understanding which buyer and seller sign and which sets out the main points of the deal agreed. It is not a legally binding document except in respect of areas such as any deposit paid, any period of exclusivity which the seller grants to the buyer and confidentiality.

Quote from history: ‘It is naught, saith the buyer: but when he is gone his way, then he boasteth.’ Proverbs (20 v14)

In summary, once the terms for selling a business have been agreed between buyer and seller, better business brokers, such as Anderson Shaw, will draft a Heads of Terms document which sets out these terms in plain English.