Heads of Agreement

As soon as both sides are sure they want to look further into the matter you should get together with your counterpart and draw up a heads of agreement. This is an informal, non-binding agenda in which both parties set out the negotiating criteria:

♦ The intent of both parties

♦ The issues and concerns that need to be addressed

♦ An outline of how the takeover will work

♦ The status and implications for your company, products, rights, and employees

♦ The timescale envisaged

Good heads of agreement are clear and straightforward. They do not overstate or over promise. While they commit neither party legally, they may form a useful lever for negotiating if there is any serious departure. For example, if you want to bind the purchaser to pay for any update of your current financial situation, you should put this in a separate short-form interim agreement, probably by an exchange of letters.

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