Buying a home in a conservation area: What you need to know before you proceed
Deciding to sell a business is rarely straightforward. For those approaching or past 50, it often carries additional weight.
The business may represent decades of work, a significant part of personal identity and, in many cases, the most valuable asset in their estate.
Getting the sale right matters enormously and the foundations of a successful transaction are laid well before any contracts are exchanged.
One of the most important early stages, and the one most often underestimated, is the heads of terms.
What heads of terms actually do
Heads of terms, sometimes called heads of agreement, set out the key commercial terms that the buyer and seller have agreed in principle before formal legal work begins.
They are not usually legally binding in their entirety, though certain clauses, such as confidentiality, exclusivity and restrictions on approaching other buyers, typically are to protect each party.
Their value lies in providing clarity ahead of more formal proceedings.
A well-drafted heads of terms ensures that both parties are working from the same understanding before time and money are committed to due diligence and detailed negotiation.
A poorly drafted set of terms or one that glosses over difficult points, tends to expose those problems later in the process, at a point where they are significantly more disruptive and expensive to resolve.
The points that matter most for older sellers
For business owners selling in their 50s or later, certain issues in the heads of terms deserve particular attention.
The first is price structure. Buyers frequently want part of the consideration deferred or tied to the post-sale performance of the business.
For a seller looking for a clean exit as part of their retirement plans, an earn-out arrangement that requires continued involvement for several years can be far from the outcome they intended.
The heads of terms should be clear about what proportion of the price is payable on completion, what conditions attach to any deferred element and what security the buyer is offering for obligations that extend beyond the day of sale.
The second is connected and it is involvement after completion.
Many buyers want the selling founder to remain with the business for a transitional period.
That is entirely reasonable, but the terms of any ongoing consultancy or employment arrangement should be agreed at heads of terms stage and should clearly reflect the seller’s actual intentions, including what happens if the relationship breaks down early.
The third is restrictive covenants, as sellers are routinely asked to agree not to compete with the business for a defined period.
The scope and duration of those restrictions should be proportionate and negotiated upfront rather than allowed to expand during the formal documentation stage.
Tax and the importance of early advice
Capital Gains Tax treatment is a critical consideration for any business sale.
Business Asset Disposal Relief, which provides a reduced CGT rate on qualifying disposals up to a lifetime limit, has risen to 18 per cent from April 2026.
The structure of the deal as agreed in the heads of terms can have a direct impact on tax outcomes, making early specialist advice important before key terms are locked down.
Sellers who complete thorough legal preparation before going to market are consistently better positioned than those who treat legal readiness as something to address after a buyer is found.
Identifying and resolving issues with title, contractual change of control provisions or outstanding regulatory matters, before the heads of terms are agreed, avoids the renegotiation and delay that so often follows when a buyer’s solicitors uncover them during due diligence.
If you are considering a business sale and want to make sure your heads of terms are properly structured from the outset, our team can help. Please get in touch for an initial discussion.
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