Heads of Terms (HoT), also known as heads of agreement, memorandum of understanding or letter of intent, is a document utilised early in an M&A deal to outline the key terms of the acquisition.
More than simply being just another document in the lengthy M&A process, however, Heads of Terms are vital to the early stages of a deal and can be used to a buyer’s advantage in numerous ways.What is a Heads of Terms agreement?
Speaking to BSR, Rishi Malliwal briefly summarised Heads of Terms agreements as typically being a two to four page document that sets out up to ten key terms of a deal. Heads of Terms are almost exclusively used in solvent deals, rather than in distressed acquisitions, which have shortened timeframes and in which the risks are readily apparent and balanced by the fact that the buyer is paying such a low consideration.Drawing up Heads of Terms
When buyers are preparing a Heads of Terms document, perhaps the key thing is to engage expert advice. Working with a professional, such as a lawyer or business advisor, will ensure that the document is structured correctly and is consistent throughout.What are the key advantages of using Heads of Terms?
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