Negotiating on Terms of a Transaction

What to consider when negotiating a transaction

All commercial transactions are different, so the terms of each will vary according to the circumstances. A few overarching points that certainly need to be considered include:

• Authority – do you have the authority to negotiate the terms of a transaction, and does the other party you are dealing with also have the necessary authority?

• Jurisdiction – what jurisdiction does the other party operate in, and could a foreign entity mean additional checks or legal/tax advice is needed?

• The transaction – exactly what is included in the agreement?

• Financial matters – how much will the transaction cost, how will it be paid and by what date?

• Risks – have you completed due diligence to check what potential risks and liabilities could be associated with the transaction? Are extra precautions needed to manage these risks?

• Confidentiality – do you want to keep the negotiations confidential by asking the other parties to sign a non-disclosure agreement?

• Timeframes – what timeframes are you working to?

• Responsibilities and liabilities – what responsibilities and liabilities is each party taking on?

• Restrictions – do you want to include restrictive covenants to prevent the other party from a certain course of action?

• Breaches – what are the consequences if either side breaches the terms of the agreement?

• Heads of Terms – do you want to draw up a Head of Terms Agreement first, which will form the basis of the agreement going forward?

The exact terms will be far more nuanced, and each and every one requires careful consideration. This could be the difference between a successful business transaction and one that damages your finances and possibly even your reputation.