Written by Henry Humphreys, Managing Companion at Humphreys Regulation
Founders can spend years getting their cap desk playbook proper, however when it’s time to construction a sale, they’re usually met with a clean web page. No customary phrases. No mannequin paperwork. Simply the customer’s final deal and their authorized crew’s thought of ‘market’.
No person a lot likes flying blind and – within the absence of any widespread availability of mannequin heads of phrases for M&A – we at Humphreys Regulation have launched Undertaking Hedz.
There Are Customary VC Financing Phrases
Late stage founders who’ve steered their corporations by the funding rounds might be very acquainted with VC funding paperwork, the BVCA mannequin phrases, and so forth. By collection B+, many may have a highly-sophisticated understanding of how and why enterprise capital offers are structured as they’re.
Within the UK, the US (which has the NVCA mannequin paperwork) and different main jurisdictions there are very well-worn paths to documenting VC investments. There may be there a very good understanding socialised amongst advisors and the market usually as to what’s boilerplate and infrequently needing to be negotiated and the place the true factors of leverage and dialogue are.
All of that could be a good factor for getting offers completed rapidly and on smart phrases.
No Customary Strategy or Phrases When It Comes To Exit
However, relating to exit, founders are sometimes stunned to find that there is no such thing as a standardisation of phrases in any respect.
Are there mannequin paperwork to show to? No. Is there a typical consensus of tips on how to construction tech exits and what the market customary phrases are? Undoubtedly not. Is the customer simply taking the paperwork and strategy from the final deal it did and trying to impose that on the sellers? Maybe.
Many offers abort earlier than completion consequently. Some offers are signed anyway however on phrases that at some point the events want they’d had extra time and data to barter away from.
Undertaking Hedz
That’s the reason we’ve launched ‘Undertaking Hedz’ in October. What we’ve completed is make some fundamental assumptions about what mid-market, mid-stage, tech exits often seem like –
- share gross sales (i.e. gross sales of the Goal firm’s complete issued share capital) moderately than asset gross sales (i.e. gross sales by that firm of all or a few of its enterprise with every asset individually transferred throughout);
- a UK-incorporated Goal firm;
- ‘locked field’ offers – that are fastened worth and extra easy – moderately than ‘completion accounts’ offers with a publish completion true up of working capital;
- a purchaser from ‘commerce’ moderately than non-public fairness, the later sometimes having their very own customary strategy and heads of phrases;
- a break up trade and completion to legislate for acquiring the consent of a regulatory, competitors or tax authority (or different conditionality), as is commonly the case; and
- in any other case wish to preserve the drafting within the heads so simple as potential, with the drafting of detailed mechanics to be saved for the lengthy type,
after which drafted up mannequin heads of phrases with accompanying drafting notes.
Why Is This A Good Factor For UK Tech?
M&A is famously laborious as a course of and fraught with threat on each purchase aspect and promote aspect. Not having a fundamental place to begin for setting out the important thing phrases doesn’t assist. So Undertaking Hedz is a step ahead from that perspective.
Permitting patrons and sellers to spend extra time on the important thing industrial factors and fewer on the boilerplate needs to be a very good factor. And dashing up M&A have to be a step ahead usually as a result of it’s the perform by which liquidity occurs and positive aspects are made, by which taxes are paid into the UK plc coffers, and by which capital is recycled into the business to spawn the following technology of start-ups.
And it’s the marketplace for exits that powers the entire VC business – with out it, founders wouldn’t hassle to begin corporations and traders wouldn’t threat their very own capital to spend money on them, and there could be no capital to recycle.
Capital Is Shifting Sooner Than Ever And The UK Has To Maintain Up
It’s a very good time to have revealed Hedz as a result of, in distinction to the marketplace for enterprise capital investments, M&A has been energetic as a market – Carta for example in latest days have reported file numbers of start-ups on their platform as having been acquired in Q3 2025.
The UK wants a robust marketplace for tech exits and a playbook for executing them. Perhaps Hedz is it. We predict it’s and can periodically be updating the draft consistent with what we see as market apply and suggestions from the business usually.
