Asset purchase transactions (EHS issues)—preliminary stage
Asset purchase transactions (EHS issues)—preliminary stage

The following Environment guidance note provides comprehensive and up to date legal information covering:

  • Asset purchase transactions (EHS issues)—preliminary stage
  • Heads of terms
  • What happens during the preliminary phase?
  • Asset purchase or share purchase?

Heads of terms

The acquisition of a business (the target business) will begin with agreement of the main commercial terms including price, deal structure, due diligence arrangements, exclusivity terms and timescale. The commercial terms will usually be negotiated directly between clients or with their accountants or other professional advisers and recorded in heads of terms, also known as a ‘letter of intent’ or ‘memorandum of understanding’.

See Practice Note: Heads of terms—share and asset purchases.

If there are known or suspected environmental concerns, the heads of terms may include:

  1. disclosure of existing environmental report(s) to the buyer

  2. requirement for a reliance agreement or collateral warranty so the buyer will get the benefit of the environmental report(s)

  3. mechanism for the buyer to carry out a phase 1 environmental audit or phase 2 ground investigations

  4. key terms for an environmental indemnity or environmental insurance

What happens during the preliminary phase?

The corporate lawyers in the preliminary phase will: