n South Africa, parties involved in private M&A transactions often sign heads of agreement before..

In South Africa, parties involved in private M&A transactions often sign heads of agreement before finalizing a definitive acquisition agreement, especially when complex negotiations are involved in transactions such as Share Sale/Business Sale Agreements. These heads of agreement are typically concise and non-binding, serving as a tool to establish if the parties agree on the essential commercial terms. They can also identify major issues or differences early, allowing for resolution of the essentials before incurring significant expenses.

Heads of Agreement typically contain:

• Identification of the involved parties.

• The consideration or price, if applicable.

• Essential/Key agreed-upon terms.

• A stated Intention to collaborate and formalize a contract.

• Specification of binding clauses.

• Conditions to be fulfilled before the final transaction.

• Essential Rights and obligations of each party.

• Pre-contractual issues covering confidentiality, exclusivity, intellectual property, due diligence, non-solicitation, legal fees, next steps, and good faith.

Creating Heads of Agreement with attention to these aspects enhances transaction certainty, risk management, and fosters a strong relationship between the parties involved.