The investor’s field guide · H
Heads of terms
An outline of the principal points agreed in a proposed transaction before detailed contracts are completed.
Explained by the editorial team
Heads of terms set out the commercial basis of a proposed deal. They are common in UK acquisitions and may cover price, structure, funding, timing and conditions. They help identify disagreements before the parties spend heavily on detailed work.
How to read them
A document may say that most commercial terms are not legally binding while making confidentiality, exclusivity or costs provisions binding. Do not assume the whole document has one status simply because of its title. Wording and applicable law matter.
What to examine
Check whether the stated price assumes a particular level of working capital, whether debt is included and which payments depend on future events. An exclusivity period may limit the seller’s ability to speak with other buyers, so its duration and conditions deserve attention. Heads of terms are not a substitute for due diligence or definitive agreements. Obtain local legal advice before signing, particularly where the document imposes obligations immediately.
General information, not investment, legal or tax advice. Examples are illustrative. Read the disclaimer.