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Free UK Heads of Terms (M&A) Template
Heads of Terms — also called a Letter of Intent or Memorandum of Understanding — is the pre-deal document that records the principal commercial terms of a proposed share or asset acquisition before solicitors are instructed to draft the Sale and Purchase Agreement. In UK M&A practice the document is overwhelmingly non-binding ("subject to contract") on its commercial substance, but a small handful of provisions — exclusivity, confidentiality, costs and break fees, governing law — bind from signature. Use our free UK template to draft an M&A-grade Heads of Terms with a clear binding / non-binding split following Walford v Miles, Pitt v PHH-compliant exclusivity, no-shop / no-talk, no-leakage MAC protection, Cavendish-compliant break fees and a full condition-precedent matrix for the DMCC 2024 merger control regime, NSIA 2021 mandatory notification, and the W&I insurance framework that has become market standard for UK SME deals.
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HEADS OF TERMS
Manda Pre-deal · England And Wales · Subject To Contract · 4 June 2026
SELLER
Sandown Software Group Limited
12 Crawford Place, London, W1H 5NE
Companies House No. 09238174
Companies House No. 09238174
By: Marianne H. Vorster, Director
BUYER
NorthFlow Holdings Limited
40 Holborn Viaduct, London, EC1A 2BS
Companies House No. 11572839
Companies House No. 11572839
By: Adrian J. Pemberton, Chief Executive Officer
Target: ApexCart Limited (10987452)
Indicative price: £24,500,000 · Target Completion: 30 September 2026
These Heads of Terms (the "Heads") are made on 4 June 2026 between Sandown Software Group Limited of 12 Crawford Place, London, W1H 5NE (the "Seller") and NorthFlow Holdings Limited of 40 Holborn Viaduct, London, EC1A 2BS (the "Buyer") in relation to a share acquisition (Seller will sell 100% of the issued share capital of the Target) of ApexCart Limited, a company registered in England and Wales under number 10987452, whose business is: B2B e-commerce checkout SaaS platform serving UK and EU retail SMEs.
STATUS — IMPORTANT. These Heads are intended principally as an honourable statement of intent. Save for the clauses expressly stated below to be binding (Exclusivity, Confidentiality, Costs / Break Fee, Governing Law and Jurisdiction), nothing in these Heads creates a legally binding obligation on either party. The parties acknowledge the principles in Walford v Miles [1992] 2 AC 128 (no enforceable duty to negotiate in good faith) and RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH [2010] UKSC 14 (parties are masters of their contractual fate). The parties intend to enter into definitive agreement(s) (the "Definitive Agreements") in due course, subject in all cases to contract.
STATUS — IMPORTANT. These Heads are intended principally as an honourable statement of intent. Save for the clauses expressly stated below to be binding (Exclusivity, Confidentiality, Costs / Break Fee, Governing Law and Jurisdiction), nothing in these Heads creates a legally binding obligation on either party. The parties acknowledge the principles in Walford v Miles [1992] 2 AC 128 (no enforceable duty to negotiate in good faith) and RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH [2010] UKSC 14 (parties are masters of their contractual fate). The parties intend to enter into definitive agreement(s) (the "Definitive Agreements") in due course, subject in all cases to contract.
1.
PROPOSED TRANSACTION [NON-BINDING]
1.1 Structure. The proposed transaction is a share acquisition (Seller will sell 100% of the issued share capital of the Target).
1.2 Target. The Target is ApexCart Limited, registered in England and Wales with number 10987452 (the "Target"). The Target's business comprises: B2B e-commerce checkout SaaS platform serving UK and EU retail SMEs.
1.3 Indicative consideration. The indicative consideration for the proposed transaction is £24,500,000 on a debt-free / cash-free basis, payable as a cash element on Completion plus an earn-out based on post-Completion performance metrics. The final consideration shall be determined in the Definitive Agreements following completion of Due Diligence.
1.4 Earn-out outline. Indicative consideration on a cash-free, debt-free, normalised-working-capital basis: £22,500,000 cash on Completion + earn-out of up to £2,000,000 payable over a 24-month period post-Completion based on Target ARR growth ≥30% YoY (£1,000,000 trigger at 100% target; sliding scale from 50% to 100%).
NON-BINDING. The structure, target and indicative consideration set out in this clause 1 are NOT legally binding.
1.2 Target. The Target is ApexCart Limited, registered in England and Wales with number 10987452 (the "Target"). The Target's business comprises: B2B e-commerce checkout SaaS platform serving UK and EU retail SMEs.
1.3 Indicative consideration. The indicative consideration for the proposed transaction is £24,500,000 on a debt-free / cash-free basis, payable as a cash element on Completion plus an earn-out based on post-Completion performance metrics. The final consideration shall be determined in the Definitive Agreements following completion of Due Diligence.
1.4 Earn-out outline. Indicative consideration on a cash-free, debt-free, normalised-working-capital basis: £22,500,000 cash on Completion + earn-out of up to £2,000,000 payable over a 24-month period post-Completion based on Target ARR growth ≥30% YoY (£1,000,000 trigger at 100% target; sliding scale from 50% to 100%).
NON-BINDING. The structure, target and indicative consideration set out in this clause 1 are NOT legally binding.
2.
TIMETABLE [NON-BINDING]
2.1 Target Completion. The parties intend to complete the transaction by 30 September 2026, subject to satisfactory completion of Due Diligence, regulatory clearances (where applicable), Buyer financing (where applicable), and signature of the Definitive Agreements.
2.2 Long-stop date. If the transaction has not completed by 31 December 2026, the parties may terminate negotiations (without prejudice to any binding clause).
NON-BINDING. The timetable in this clause is indicative only and NOT legally binding.
2.2 Long-stop date. If the transaction has not completed by 31 December 2026, the parties may terminate negotiations (without prejudice to any binding clause).
NON-BINDING. The timetable in this clause is indicative only and NOT legally binding.
3.
SUBJECT TO CONTRACT [BINDING — INTERPRETATION]
All discussions, communications and documents in connection with these Heads and the proposed transaction are "subject to contract" and "without prejudice" until the Definitive Agreements are executed. No agreement or commitment of any kind is intended or created by these Heads or by any subsequent negotiation, save for the Binding Clauses identified in clause 4 below. The parties acknowledge that the doctrine in RTS Flexible Systems v Molkerei Müller [2010] UKSC 14 may treat conduct as evidence of contract formation, and accordingly each party shall mark all communications relating to the deal "subject to contract" and shall not act on any provisional understanding as if it were binding.
4.
BINDING CLAUSES INDEX [INTERPRETATION]
The following clauses ARE intended to be legally binding on both parties from the date these Heads are signed:
(a) Exclusivity (clause 5) — lock-out / no-shop obligations on the Seller for the Exclusivity Period
(b) Confidentiality (clause 6) — protection of deal facts and DD information
(c) Break Fee (clause 8) — payment obligation on the specified triggering party
(d) Costs (clause 12) — each party's cost-bearing arrangement
(e) Governing Law and Jurisdiction (clause 13)
All other clauses in these Heads are NOT intended to create legally binding obligations and are subject to the execution of the Definitive Agreements.
(a) Exclusivity (clause 5) — lock-out / no-shop obligations on the Seller for the Exclusivity Period
(b) Confidentiality (clause 6) — protection of deal facts and DD information
(c) Break Fee (clause 8) — payment obligation on the specified triggering party
(d) Costs (clause 12) — each party's cost-bearing arrangement
(e) Governing Law and Jurisdiction (clause 13)
All other clauses in these Heads are NOT intended to create legally binding obligations and are subject to the execution of the Definitive Agreements.
5.
EXCLUSIVITY [BINDING]
5.1 Exclusivity period. The exclusivity period (the "Exclusivity Period") begins on the date these Heads are signed and continues for 90 days.
5.2 Exclusivity obligation. During the Exclusivity Period, the Seller shall not, and shall procure that no person connected with the Seller or the Target shall, directly or indirectly, (a) solicit, initiate, encourage or facilitate any inquiry, proposal or offer from any person regarding any Alternative Transaction; or (b) negotiate, discuss, conclude or enter into any agreement, arrangement or understanding with any person other than the Buyer in respect of any Alternative Transaction. An "Alternative Transaction" means any transaction which would or could (a) result in a sale or transfer of all or a substantial part of the share capital or business of the Target to a third party; or (b) interfere with or delay the proposed transaction.
5.3 Notification. If the Seller receives any unsolicited approach during the Exclusivity Period regarding an Alternative Transaction, the Seller shall promptly (within 2 Business Days) notify the Buyer of the fact of such approach (but is not required to disclose the identity of the third party or the terms of the approach).
5.4 Lock-out enforceability. The parties acknowledge that, following Pitt v PHH Asset Management [1994] 1 WLR 327, a lock-out agreement for a defined period is legally binding (distinguishing the position in Walford v Miles [1992] 2 AC 128).
5.5 Carve-outs. The exclusivity obligation in clause 5.2 does not apply to: (a) responding to inquiries from the Target's existing PE shareholder regarding the proposed transaction; (b) responding to a regulator or court order; or (c) where the Seller's fiduciary duty to a Target Member (per the Target's Articles) requires consideration of a superior unsolicited bona-fide offer above £30 million.
BINDING. This clause 5 is legally binding on the Seller from the date these Heads are signed.
5.2 Exclusivity obligation. During the Exclusivity Period, the Seller shall not, and shall procure that no person connected with the Seller or the Target shall, directly or indirectly, (a) solicit, initiate, encourage or facilitate any inquiry, proposal or offer from any person regarding any Alternative Transaction; or (b) negotiate, discuss, conclude or enter into any agreement, arrangement or understanding with any person other than the Buyer in respect of any Alternative Transaction. An "Alternative Transaction" means any transaction which would or could (a) result in a sale or transfer of all or a substantial part of the share capital or business of the Target to a third party; or (b) interfere with or delay the proposed transaction.
5.3 Notification. If the Seller receives any unsolicited approach during the Exclusivity Period regarding an Alternative Transaction, the Seller shall promptly (within 2 Business Days) notify the Buyer of the fact of such approach (but is not required to disclose the identity of the third party or the terms of the approach).
5.4 Lock-out enforceability. The parties acknowledge that, following Pitt v PHH Asset Management [1994] 1 WLR 327, a lock-out agreement for a defined period is legally binding (distinguishing the position in Walford v Miles [1992] 2 AC 128).
5.5 Carve-outs. The exclusivity obligation in clause 5.2 does not apply to: (a) responding to inquiries from the Target's existing PE shareholder regarding the proposed transaction; (b) responding to a regulator or court order; or (c) where the Seller's fiduciary duty to a Target Member (per the Target's Articles) requires consideration of a superior unsolicited bona-fide offer above £30 million.
BINDING. This clause 5 is legally binding on the Seller from the date these Heads are signed.
6.
CONFIDENTIALITY [BINDING]
6.1 Confidential information. Each party shall, and shall procure that its directors, employees, advisers and agents shall, treat as confidential and not disclose to any third party (a) the existence of these Heads and the proposed transaction; (b) the terms of the proposed transaction; and (c) all non-public information received from the other party in the course of negotiations and Due Diligence (together "Confidential Information").
6.2 Permitted disclosure. Confidential Information may be disclosed to (a) directors, employees and professional advisers on a need-to-know basis, under an equivalent duty of confidence; (b) where required by law, regulation or court order; or (c) with the prior written consent of the other party.
6.3 Duration. The confidentiality obligation in this clause continues for five (5) years from the date of these Heads, whether or not the Definitive Agreements are entered into.
6.4 Super-confidentiality (deal-fact information). Each party further undertakes that the FACT of the Heads, the FACT of negotiations, and any pricing or financial terms discussed shall be subject to "super-confidentiality" — disclosure permitted ONLY to: (a) a defined Deal Team list of named individuals from each party and their professional advisers; (b) where strictly required by law (with prior consultation). This restriction continues until public announcement of the transaction or expiry of the Exclusivity Period (whichever first).
6.5 Press releases. Neither party shall make any public announcement, press release or other public statement regarding the proposed transaction without the prior written consent of the other party.
BINDING. This clause 6 is legally binding from the date these Heads are signed.
6.2 Permitted disclosure. Confidential Information may be disclosed to (a) directors, employees and professional advisers on a need-to-know basis, under an equivalent duty of confidence; (b) where required by law, regulation or court order; or (c) with the prior written consent of the other party.
6.3 Duration. The confidentiality obligation in this clause continues for five (5) years from the date of these Heads, whether or not the Definitive Agreements are entered into.
6.4 Super-confidentiality (deal-fact information). Each party further undertakes that the FACT of the Heads, the FACT of negotiations, and any pricing or financial terms discussed shall be subject to "super-confidentiality" — disclosure permitted ONLY to: (a) a defined Deal Team list of named individuals from each party and their professional advisers; (b) where strictly required by law (with prior consultation). This restriction continues until public announcement of the transaction or expiry of the Exclusivity Period (whichever first).
6.5 Press releases. Neither party shall make any public announcement, press release or other public statement regarding the proposed transaction without the prior written consent of the other party.
BINDING. This clause 6 is legally binding from the date these Heads are signed.
7.
CONDUCT OF BUSINESS, NO-LEAKAGE AND MAC [NON-BINDING INTENT]
7.1 Conduct of business. Pending Completion (or the earlier termination of negotiations), the Seller shall procure that the Target carries on business in the ordinary course consistent with past practice, and shall not without the prior written consent of the Buyer (such consent not to be unreasonably withheld) take any of the following actions where the value of the action exceeds £100,000:
(a) declare or pay any dividend or other distribution to the Seller (or any shareholder);
(b) issue, repurchase or vary any share capital;
(c) enter into, vary or terminate any material contract;
(d) commence, settle or compromise any litigation involving the Target;
(e) grant, vary or terminate any senior employment contract or service agreement;
(f) incur any borrowing or capital expenditure outside the ordinary course;
(g) acquire or dispose of any asset; or
(h) make any material change in the nature of the Target's business.
7.2 No leakage. The Seller shall procure that, from from the date of these Heads, no value passes from the Target to the Seller or any person connected with the Seller other than (a) ordinary-course salary, bonus and benefits to employees; (b) ordinary-course supplier and customer payments; and (c) such other payments as are expressly permitted in writing by the Buyer.
7.3 Permitted leakage. The following payments / value transfers are permitted: (a) ordinary-course employee compensation; (b) payments under existing customer / supplier contracts disclosed in the Disclosure Bundle; (c) tax payments to HMRC.
7.4 Material Adverse Change (MAC). The Buyer shall have the right to terminate negotiations and these Heads (without break-fee liability under clause 8) if, between the date of these Heads and Completion, a Material Adverse Change occurs in the Target's business, prospects, financial condition or assets. "Material Adverse Change" means a change which would or would reasonably be expected to result in a reduction of more than 20% in the Target's EBITDA or net asset value (excluding general market or industry changes affecting comparable businesses similarly).
7.5 Ordinary course carve-outs. The following matters are deemed to be in the ordinary course and do not require prior consent: (a) ordinary-course product releases and pricing adjustments consistent with past practice; (b) routine renewal of customer SaaS contracts at substantially the same terms.
NON-BINDING. The conduct-of-business and MAC commitments in this clause 7 are statements of intent only; they will be drafted in binding form in the Definitive Agreements.
(a) declare or pay any dividend or other distribution to the Seller (or any shareholder);
(b) issue, repurchase or vary any share capital;
(c) enter into, vary or terminate any material contract;
(d) commence, settle or compromise any litigation involving the Target;
(e) grant, vary or terminate any senior employment contract or service agreement;
(f) incur any borrowing or capital expenditure outside the ordinary course;
(g) acquire or dispose of any asset; or
(h) make any material change in the nature of the Target's business.
7.2 No leakage. The Seller shall procure that, from from the date of these Heads, no value passes from the Target to the Seller or any person connected with the Seller other than (a) ordinary-course salary, bonus and benefits to employees; (b) ordinary-course supplier and customer payments; and (c) such other payments as are expressly permitted in writing by the Buyer.
7.3 Permitted leakage. The following payments / value transfers are permitted: (a) ordinary-course employee compensation; (b) payments under existing customer / supplier contracts disclosed in the Disclosure Bundle; (c) tax payments to HMRC.
7.4 Material Adverse Change (MAC). The Buyer shall have the right to terminate negotiations and these Heads (without break-fee liability under clause 8) if, between the date of these Heads and Completion, a Material Adverse Change occurs in the Target's business, prospects, financial condition or assets. "Material Adverse Change" means a change which would or would reasonably be expected to result in a reduction of more than 20% in the Target's EBITDA or net asset value (excluding general market or industry changes affecting comparable businesses similarly).
7.5 Ordinary course carve-outs. The following matters are deemed to be in the ordinary course and do not require prior consent: (a) ordinary-course product releases and pricing adjustments consistent with past practice; (b) routine renewal of customer SaaS contracts at substantially the same terms.
NON-BINDING. The conduct-of-business and MAC commitments in this clause 7 are statements of intent only; they will be drafted in binding form in the Definitive Agreements.
8.
BREAK FEE [BINDING]
8.1 Break fee payable. The Seller shall pay the Buyer a break fee equal to £250,000 if Completion fails to occur in the circumstances set out in clause 8.2.
8.2 Triggers. The break fee in clause 8.1 is payable on the following events:
(a) the Seller enters into an Alternative Transaction in breach of clause 5; (b) the Seller withdraws from negotiations without good cause; (c) the Seller materially breaches the Exclusivity or Conduct of Business obligations of these Heads.
8.3 Liquidated damages, not a penalty. The parties agree that the break fee represents a genuine pre-estimate of the loss the recipient party would suffer on a non-completion in the relevant circumstances, and is not a penalty within the meaning of Cavendish Square Holding BV v Makdessi + ParkingEye Ltd v Beavis [2015] UKSC 67. The break fee is the recipient party's exclusive financial remedy for non-Completion in the relevant circumstances.
8.4 Payment. Any break fee due shall be paid within 30 days of the trigger event (or such later date as the parties agree in writing).
BINDING. This clause 8 is legally binding from the date these Heads are signed.
8.2 Triggers. The break fee in clause 8.1 is payable on the following events:
(a) the Seller enters into an Alternative Transaction in breach of clause 5; (b) the Seller withdraws from negotiations without good cause; (c) the Seller materially breaches the Exclusivity or Conduct of Business obligations of these Heads.
8.3 Liquidated damages, not a penalty. The parties agree that the break fee represents a genuine pre-estimate of the loss the recipient party would suffer on a non-completion in the relevant circumstances, and is not a penalty within the meaning of Cavendish Square Holding BV v Makdessi + ParkingEye Ltd v Beavis [2015] UKSC 67. The break fee is the recipient party's exclusive financial remedy for non-Completion in the relevant circumstances.
8.4 Payment. Any break fee due shall be paid within 30 days of the trigger event (or such later date as the parties agree in writing).
BINDING. This clause 8 is legally binding from the date these Heads are signed.
9.
DUE DILIGENCE [NON-BINDING INTENT]
9.1 Scope. The Buyer shall conduct full "red-book" due diligence (legal + financial + tax + commercial + IT + ESG + insurance) on the Target.
9.2 Due Diligence Period. The Buyer shall use reasonable efforts to complete Due Diligence within 60 Business Days of receiving the Disclosure Bundle.
9.3 Data room. The Seller shall provide a virtual data room within 10 Business Days of these Heads, containing the Disclosure Bundle as agreed between the parties' legal advisers.
9.4 Management access. The Seller shall provide reasonable access to the Target's management and key staff for Due Diligence purposes during normal business hours and on reasonable notice.
NON-BINDING. The Due Diligence framework in this clause is intent only; specific obligations will be set out in a Data Room Procedure Letter and the Definitive Agreements.
9.2 Due Diligence Period. The Buyer shall use reasonable efforts to complete Due Diligence within 60 Business Days of receiving the Disclosure Bundle.
9.3 Data room. The Seller shall provide a virtual data room within 10 Business Days of these Heads, containing the Disclosure Bundle as agreed between the parties' legal advisers.
9.4 Management access. The Seller shall provide reasonable access to the Target's management and key staff for Due Diligence purposes during normal business hours and on reasonable notice.
NON-BINDING. The Due Diligence framework in this clause is intent only; specific obligations will be set out in a Data Room Procedure Letter and the Definitive Agreements.
10.
CONDITION PRECEDENTS AND WANDI INSURANCE [NON-BINDING INTENT]
Completion of the proposed transaction is expected to be conditional on the following matters being satisfied (or waived by the relevant party):
(a) Due Diligence. Completion of Due Diligence satisfactory to the Buyer (acting reasonably).
(b) Definitive Agreements. Execution of the Definitive Agreements in form and substance acceptable to both parties.
(c) CMA merger control clearance under the Enterprise Act 2002 + Digital Markets, Competition and Consumers Act 2024 (CMA Phase 1 / Phase 2 review or notice that no review is required)
(d) Buyer obtaining a committed financing letter from a reputable UK bank or lending institution
WandI Insurance framework. The Buyer intends to procure a standalone Buyer-side WandI insurance policy. There shall be no recourse to the Seller for breach of general warranties (save in respect of fraud and as specifically carved out).
Additional Conditions. (f) the Target obtaining customer-contract consents to change-of-control from its top 5 customers (representing more than 50% of ARR); (g) the Target retaining its founder CEO + CTO under new Buyer-employment agreements with 24-month commitment terms.
NON-BINDING. The Conditions Precedent and WandI framework in this clause are statements of intent; the binding conditions will be set out in the Definitive Agreements.
(a) Due Diligence. Completion of Due Diligence satisfactory to the Buyer (acting reasonably).
(b) Definitive Agreements. Execution of the Definitive Agreements in form and substance acceptable to both parties.
(c) CMA merger control clearance under the Enterprise Act 2002 + Digital Markets, Competition and Consumers Act 2024 (CMA Phase 1 / Phase 2 review or notice that no review is required)
(d) Buyer obtaining a committed financing letter from a reputable UK bank or lending institution
WandI Insurance framework. The Buyer intends to procure a standalone Buyer-side WandI insurance policy. There shall be no recourse to the Seller for breach of general warranties (save in respect of fraud and as specifically carved out).
Additional Conditions. (f) the Target obtaining customer-contract consents to change-of-control from its top 5 customers (representing more than 50% of ARR); (g) the Target retaining its founder CEO + CTO under new Buyer-employment agreements with 24-month commitment terms.
NON-BINDING. The Conditions Precedent and WandI framework in this clause are statements of intent; the binding conditions will be set out in the Definitive Agreements.
11.
POST-SIGNING REGULATORY [NON-BINDING INTENT]
11.1 ECCTA 2023 identity verification. The parties acknowledge that the Economic Crime and Corporate Transparency Act 2023 identity-verification regime is live for all UK company directors, PSCs and (from 18 November 2025) LLP members. The Seller shall procure that, prior to Completion, all directors, PSCs and (if applicable) LLP members of the Target have completed identity verification with Companies House under the regime. Failure to complete identity verification may delay Completion.
11.2 PSC + IDV due diligence. The Buyer's Due Diligence shall include verification of the Target's PSC register, the identity-verification status of each PSC and director, and any pending IDV deadlines that may affect Completion timing.
NON-BINDING. The post-signing regulatory commitments in this clause are statements of intent; binding obligations will be set out in the Definitive Agreements.
11.2 PSC + IDV due diligence. The Buyer's Due Diligence shall include verification of the Target's PSC register, the identity-verification status of each PSC and director, and any pending IDV deadlines that may affect Completion timing.
NON-BINDING. The post-signing regulatory commitments in this clause are statements of intent; binding obligations will be set out in the Definitive Agreements.
12.
COSTS [BINDING]
Each party shall bear its own legal, financial, tax and other professional adviser costs in connection with these Heads, the Due Diligence and the Definitive Agreements, regardless of whether the proposed transaction completes.
This clause does not affect the recovery of legal costs in the case of fraud, deceit or wilful breach.
BINDING. This clause is legally binding from the date these Heads are signed.
This clause does not affect the recovery of legal costs in the case of fraud, deceit or wilful breach.
BINDING. This clause is legally binding from the date these Heads are signed.
13.
REVERSE-ENGINEERING PROTECTION [BINDING — CONFIDENTIALITY EXTENSION]
Neither party shall, during the Exclusivity Period or for 12 months thereafter, use any Confidential Information of the other party to enter into discussions with, or solicit, the Target's customers, suppliers, employees, or contracting counterparties for the purpose of replicating or substantially imitating the Target's business model, products or services. This obligation supplements the Confidentiality obligation in clause 6 and the Exclusivity obligation in clause 5.
BINDING. This clause is legally binding from the date these Heads are signed.
BINDING. This clause is legally binding from the date these Heads are signed.
14.
GOVERNING LAW AND JURISDICTION [BINDING]
These Heads (including the binding clauses identified above, and any dispute or claim arising out of or in connection with them, whether contractual or non-contractual) shall be governed by and construed in accordance with the laws of England and Wales. The parties irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any such dispute or claim.
BINDING. This clause is legally binding from the date these Heads are signed.
BINDING. This clause is legally binding from the date these Heads are signed.
15.
EXECUTION AND SIGNATURE
The parties have signed these Heads of Terms on the date set out at the start of this document. Each party signs both (a) in agreement with the non-binding statements of intent set out in clauses 1, 2, 7, 9, 10, 11; and (b) in legally binding agreement with the Binding Clauses identified in the heading of each clause (Exclusivity, Confidentiality, Break Fee, Costs, and Governing Law and Jurisdiction). The execution of these Heads does not create a binding obligation to enter into the Definitive Agreements.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated.
SELLER
Marianne H. Vorster, Director
Sandown Software Group Limited
Date: ____________________
BUYER
Adrian J. Pemberton, Chief Executive Officer
NorthFlow Holdings Limited
Date: ____________________
Available as a print-ready PDF or an editable Microsoft Word (.docx) file.
What Are Heads of Terms in UK M&A?
A UK Heads of Terms (HoT) is the first signed document on a private-company M&A transaction — issued after the high-level negotiation and indicative offer phase, before solicitors are instructed to draft the full long-form Sale and Purchase Agreement. It records the commercial substance the parties have agreed in principle: deal structure (share or asset), indicative price and consideration form, completion timeline, exclusivity, confidentiality, conditions to signing and a long-stop date for completion. The same document is also known in UK practice as a Letter of Intent, a Memorandum of Understanding, an Indicative Offer Letter or simply a Term Sheet.
The defining feature of a UK Heads of Terms is the explicit binding / non-binding split. The commercial substance — price, structure, conditions — is non-binding and headed "subject to contract" so that the parties retain freedom to negotiate the long-form agreement on its own merits. A defined set of operative clauses — exclusivity, confidentiality, costs and break fees, and governing law — does bind from signature, because each of those serves a function independent of whether the deal ultimately closes. Lord Ackner's much-cited dictum in Walford v Miles [1992] 2 AC 128 — that an agreement to negotiate in good faith is "inherently repugnant" and "unworkable in practice" — is what drives the binding / non-binding architecture; conversely Pitt v PHH Asset Management [1994] 1 WLR 327 confirmed that lock-out agreements for a defined period ARE enforceable, which is why the exclusivity clause is the document's load-bearing binding term.
UK Heads of Terms are used on around 70-80% of private-company M&A deals above £1 million — the higher the deal value, the more universally the document is used. Buyers favour Heads of Terms for exclusivity (so they can commit due diligence spend without a competing bidder snatching the deal); Sellers favour them for confidentiality and headline price commitment. Both parties favour them for clarity ahead of a potentially six- to twelve-week SPA negotiation. Where the parties are corporate and incorporated in the UK, the post-ECCTA 2023 identity verification regime — live for every UK company director from 18 November 2025 — also applies to the signatories, and any new corporate vehicle interposed before completion must complete IDV before it can sign the SPA.
What's Covered in This Template
This UK Heads of Terms template covers the full pre-deal architecture used on private-company M&A transactions in England and Wales, Scotland and Northern Ireland.
Parties Block
Buyer, Seller and (where relevant) Target Company with Companies House numbers, addresses and named signatories.
Deal Structure
Share acquisition, asset acquisition, statutory merger or to-be-determined — with the consequences flagged in the binding / non-binding ladder.
Consideration Form
Cash on completion, cash + deferred consideration, cash + earn-out, cash + Buyer shares, or cash + loan notes — each flagged for tax and security implications.
Indicative Price
Headline value plus, where chosen, earn-out outline (EBITDA / revenue / milestones) — clearly tagged non-binding.
Target Completion Date
The date the parties aim to sign the SPA and complete, balanced against the exclusivity period and DD scope.
Binding vs Non-Binding Ladder
Explicit clause-by-clause flag — commercial terms non-binding, exclusivity / confidentiality / break fees / costs / governing law binding.
Governing Law
England and Wales, Scotland or Northern Ireland with matching exclusive jurisdiction to the courts of that constituent UK nation.
Exclusivity (Expert)
30 / 45 / 60 / 90 / 120-day lock-out with no-shop, no-shop + no-talk, plus carve-outs — Pitt v PHH-compliant.
Confidentiality + Super-Confidentiality (Expert)
2 / 5 / 7-year or indefinite (trade secrets only) protection of both deal facts and DD information; tier-two super-confidentiality option for sensitive data rooms.
Press Disclosure Controls (Expert)
Mutual consent, mandatory consultation or reactive-only press release — protecting both Buyer and Seller from market speculation.
No-Leakage + Pre-Completion MAC (Expert)
Locked-box / signing / completion no-leakage period; Material Adverse Change termination; permitted leakage list (ordinary salary, agreed bonuses, etc.).
Conduct of Business (Expert)
£-threshold for material decisions during the no-leakage period; ordinary-course carve-outs; Buyer consent rights without crossing the line into pre-completion control.
Break Fees (Expert)
None / Buyer-to-Seller / Seller-to-Buyer / mutual; cap at 50% of DD costs, fixed cap or no cap; Cavendish Square v Makdessi penalty-clause-compliant drafting.
Due Diligence Scope (Expert)
Commercial only, legal only, financial + tax, or full "red book" with environmental and IT — with 21 / 28 / 60 / 90-day exclusive DD windows.
Regulatory Clearance Conditions (Expert)
No clearance, CMA only (DMCC 2024), NSIA 2021 only (17 sensitive sectors), combined CMA + NSIA, or foreign regulators where relevant.
Financing Condition (Expert)
No financing condition, committed letter of credit, best-efforts financing, or documented facility agreement as condition precedent.
W&I Insurance Framework (Expert)
None, standalone Buyer-side W&I, stapled Seller-side W&I, or partial coverage with direct Seller recourse for known matters.
Long-Stop Date (Expert)
Hard back-stop after which either party may walk without break-fee liability; standard 90 to 180 days from signing the HoT.
ECCTA 2023 IDV Trigger (Expert)
Post-signing identity verification trigger — any new corporate vehicle interposed before SPA signing must complete IDV through GOV.UK One Login (live for all UK directors from 18 November 2025).
Costs (Expert)
Each party bears its own DD and adviser costs (UK standard), split DD costs, or roll up into the break-fee mechanism.
How to Create Heads of Terms
Follow these steps to draft a UK M&A-grade Heads of Terms that protects both parties through the SPA negotiation phase.
- 1
Enter Party and Target Details
Provide Buyer, Seller and (where the Buyer is acquiring a subsidiary) the Target Company name, address, Companies House number and named signatories.
- 2
Set the Deal Structure and Consideration
Choose share, asset, statutory merger or to-be-determined. Select consideration form — cash, cash + deferred, cash + earn-out, cash + Buyer shares or cash + loan notes.
- 3
Set Indicative Price and Target Completion
Insert the headline value and, where chosen, the earn-out outline. Set a realistic target completion date balanced against DD scope and any regulatory clearance window.
- 4
Choose Exclusivity (Expert)
Pick lock-out length (30 / 45 / 60 / 90 / 120 days) and type (no-shop, no-shop + no-talk). Add carve-outs for fiduciary obligations to existing shareholders or pre-existing discussions.
- 5
Configure Confidentiality and Press (Expert)
2 / 5 / 7-year or indefinite confidentiality; super-confidentiality flag for sensitive DD; mutual consent, consultation or reactive-only press release controls.
- 6
Add No-Leakage and Conduct of Business (Expert)
Choose the no-leakage period (signing / locked box / completion), the £-threshold for material decisions, and the permitted leakage list (salaries, agreed bonuses, dividends already declared).
- 7
Add Break Fees (Expert)
Pick no break fee, Buyer-to-Seller, Seller-to-Buyer or mutual; cap at 50% of DD costs, a fixed cap, or uncapped (rare). Configure triggers for Cavendish compliance.
- 8
Add Regulatory Conditions (Expert)
Tick CMA (DMCC 2024) if the deal crosses any of the merger thresholds; tick NSIA 2021 if any of the 17 sensitive sectors is involved; tick foreign regulators where required.
- 9
Set W&I Intent and Long-Stop Date (Expert)
Indicate the intended W&I insurance approach and a hard long-stop date (typically 90-180 days) after which either party may walk away without break-fee liability.
- 10
Review and Download
Preview the Heads of Terms and download as a free PDF or, with Expert, an editable Microsoft Word (.docx) for execution by Buyer and Seller signatories.
Why Doxuno documents are different
Four things that make our templates more thorough than AI-generated drafts and more current than static template libraries.
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Templates carrying statute references are continuously updated as the law changes. Your document always reflects the current legal framework.
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Free to download. Vector text, embedded fonts, statute citations baked in. Print, sign, file. Ready for any signing flow including electronic signature.
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Continue editing in Word after download. Add custom clauses, reuse the template for similar agreements, or share with a colleague for collaborative review.
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Legal Considerations
UK Heads of Terms sit at the intersection of contract formation principles, restraint-of-trade doctrine, the penalty clause rule, and the UK merger and national security regulatory framework. Drafting that ignores any of those four pillars risks unintended binding effect, unenforceable exclusivity, void break fees or mandatory clearance default.
This template is for informational purposes only and does not constitute legal advice. UK M&A transactions are highly specialised — for any deal above £2 million, any cross-border element, any regulated target (financial services, healthcare, defence, telecoms), or any deal triggering DMCC 2024 thresholds or NSIA 2021 mandatory sectors, professional legal advice from M&A counsel is strongly recommended.
Reviewed for England & Wales, Scotland and Northern Ireland law
The Binding vs Non-Binding Ladder — Walford and RTS Flexible Systems
Lord Ackner's dictum in Walford v Miles [1992] 2 AC 128 — that an agreement to negotiate in good faith is "inherently repugnant to the adversarial position of the parties" and "unworkable in practice" — is the reason UK Heads of Terms are overwhelmingly drafted as non-binding on commercial substance, with only a defined set of operative clauses (exclusivity, confidentiality, costs, break fees, governing law) binding from signature. RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH [2010] UKSC 14 confirmed the corollary: parties are "the masters of their contractual fate" and may agree to be bound now while deferring details — but conduct (acting on the deal, paying deposits, performing) may indicate binding agreement even where some terms are not finalised. The template's explicit "subject to contract" reaffirmation and clause-by-clause binding ladder is what manages this risk.
Exclusivity — Pitt v PHH and Petromec
Pitt v PHH Asset Management [1994] 1 WLR 327 distinguished Walford and held that a lock-out agreement for a DEFINED period is enforceable — the obligation is negative (not to negotiate with a third party for a fixed window), not the positive open-ended duty Walford rejected. UK M&A exclusivity is universally drafted as a defined-period lock-out (30 days for low-complexity SME deals, 60 days market standard, 90-120 days for complex carve-outs and regulated targets), often combined with a no-shop (no soliciting or accepting third-party offers) and a no-talk (no responding to unsolicited third-party offers). Petromec v Petroleo Brasileiro [2005] EWCA Civ 891 confirmed that an express good-faith negotiation duty CAN be enforceable where it forms part of a wider concluded contract — but UK Heads of Terms practice continues to lean on the safer lock-out structure.
Break Fees — Cavendish, ParkingEye and the Penalty Doctrine
Cavendish Square Holding BV v Makdessi / ParkingEye Ltd v Beavis [2015] UKSC 67 modernised the penalty clause doctrine: a break fee is not a penalty where it protects a legitimate interest of the innocent party and the sum is not extravagant, exorbitant or unconscionable when judged at the time of the contract. For UK M&A Heads of Terms, the legitimate interest is the recovery of due-diligence costs and the lost opportunity to pursue an alternative deal during the exclusivity period. The market norm — a cap at 50% of properly-incurred DD costs, or a modest fixed cap of £25,000-£100,000 — passes Cavendish scrutiny. Uncapped break fees, or fees calculated as a percentage of deal value, attract penalty-clause risk and should be approached with caution.
DMCC 2024 Merger Control — Voluntary, but Call-In Risk
The Digital Markets, Competition and Consumers Act 2024 (in force 1 January 2025) sets the UK merger thresholds: £100 million UK target turnover; 25% share-of-supply plus £10 million UK nexus; hybrid 33% global share plus £350 million UK turnover; and a small-merger safe harbour where the target's UK turnover is below £10 million. UK merger control is voluntary — parties decide whether to notify — but the CMA may call in transactions within four months of substantial completion. For deals near the thresholds, the Heads of Terms should make CMA clearance a condition precedent to completion (Expert tier), or at minimum flag the regulatory risk and identify the CMA call-in window in the long-stop date setting.
NSIA 2021 Mandatory Notification — 17 Sensitive Sectors
The National Security and Investment Act 2021 (in force 4 January 2022) requires mandatory pre-completion notification of acquisitions of qualifying entities active in any of 17 specified sensitive sectors — advanced materials, advanced robotics, AI, civil nuclear, communications, computing hardware, critical suppliers to government, cryptographic authentication, data infrastructure, defence, energy, military and dual-use, quantum technologies, satellite and space, suppliers to the emergency services, synthetic biology, and transport. Completion before clearance is void as a matter of law and may attract criminal liability for the Buyer. Where any NSIA sector is engaged, the Heads of Terms should make NSIA clearance an absolute condition precedent and set a long-stop date that accommodates the 30 working day initial review plus any extension.
ECCTA 2023 and Identity Verification at SPA Signing
The Economic Crime and Corporate Transparency Act 2023 introduced compulsory identity verification (IDV) for everyone running a UK company. Voluntary IDV through GOV.UK One Login or in person at a Post Office (free of charge) has been available since 8 April 2025. From 18 November 2025 IDV is compulsory for every UK company director and PSC, and new directors must verify before being appointed. Where a Buyer interposes a new UK acquisition vehicle between signing the Heads of Terms and signing the SPA — common for tax-driven structures — that vehicle's directors must complete IDV before the SPA can be properly signed. The Expert template flags this as a post-signing IDV trigger so the Buyer does not lose deal momentum waiting for Companies House verification.
Frequently Asked Questions
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