Once both sides are serious, the deal is captured in heads of terms (also called a term sheet or heads of agreement). It's the blueprint the formal sale agreement follows — and it's the moment to pin down the things owners care about most, while you still have maximum leverage. This is a clause-by-clause tour of what it covers, what's binding, and where owners most often leave value or protection on the table.
What heads of terms cover
| Clause | What to nail down |
|---|---|
| Price | The number and exactly how it's calculated (e.g. multiple of GRF, with the fee base defined) |
| Structure | Cash on completion vs deferred vs any earn-out — and the timing of each tranche |
| Deal type | Share sale or asset sale — it drives your tax, so decide deliberately |
| Timeline | Target completion date and the length/shape of the handover |
| Your involvement | Clean break, or a phased step-down — for how long, doing what, and paid how |
| People & clients | What happens to staff (TUPE) and how client relationships are transitioned |
| Conditions | What must be true to complete (satisfactory diligence, consents, etc.) |
| Exclusivity | A period in which you won't negotiate with other buyers |
| Confidentiality | How the process — and the fact of it — stays private |
| Warranties (outline) | The broad shape of the assurances you'll give in the final agreement |
What's binding and what isn't
Most of the commercial terms (price, structure) are usually a statement of intent, firmed up in the sale agreement after diligence. But several clauses are typically legally binding even at heads-of-terms stage, so read them carefully:
- Confidentiality — both sides keep the discussions, and often the fact of them, private.
- Exclusivity — you agree not to talk to other buyers for a set period. Fair, but don't grant an open-ended lock-out.
- Costs — who bears their own advisory costs (usually each side its own).
"Non-binding" does not mean "doesn't matter." The heads set the anchor for everything that follows; walking back a term later is possible but costs goodwill and momentum.
The clauses owners most often underestimate
Two clauses cause the most regret when they're skated over. First, what happens to staff and clients after completion — if their continuity matters to you (it does to most owners), say so here, in writing, not as a verbal understanding. Second, how any deferred consideration is protected — how it's calculated, when it's paid, and what happens if the buyer's own actions affect it. Get these into the heads while you have leverage; see earn-outs and deferred consideration and the tax treatment.
Why heads of terms matter
- They align both sides before expensive lawyers get involved
- They surface deal-breakers early and cheaply
- They lock in protections for staff and clients while you have leverage
- They set the tone — a fair, clear heads makes for a calm completion
Practical tips
- Take advice before signing, even though most of it is non-binding — the binding bits (exclusivity, confidentiality, costs) are real.
- Define the fee base precisely. "1× recurring fees" means little until "recurring fees" is defined.
- Keep exclusivity time-limited and tied to the buyer progressing in good faith.
- Write down the handover — your role, hours and duration — so expectations are shared.
Heads of terms come after initial due diligence and lead into the formal agreement and completion.
Frequently asked questions
Are heads of terms legally binding?
Mostly not — the commercial terms (price, structure) are usually a statement of intent firmed up later. But specific clauses, typically confidentiality, exclusivity and costs, are usually binding, so read and take advice before signing.
What should heads of terms include when selling a practice?
Price and how it's calculated, deal structure and timing, whether it's a share or asset sale, the timeline, your ongoing involvement, what happens to staff and clients, completion conditions, exclusivity and confidentiality.
What's the most important thing to get into heads of terms?
The protections that are hard to claw back later: how staff and clients are treated, and exactly how any deferred or contingent consideration is calculated and protected. Pin these down while you have leverage.
Should I sign heads of terms without a lawyer?
It's wise to take advice first. Even though most terms are non-binding, the binding clauses (exclusivity, confidentiality, costs) carry real obligations, and a clear heads makes the whole deal smoother.
Thinking about your next chapter?
Whether you want to sell, step back gradually, or just take the back office off your plate — start with a confidential, no-obligation call with the buyer.
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