Closing the Deal

So, after much pitching and selling to prospective investors and painful hours of honing your business plan and forecasts, you’ve done it. You have an offer of investment and are looking to close the deal. Hard work done? Unfortunately not.


It is important to fully understand the key terms and the basic deal structure. Is there one or multiple investors? Are all the investors angels, or funds, or a mix? Is there a lead investor? Will the investment be all equity, all debt, or a mix? Will the investment all go in on day one or will it be staged? Are tax considerations fundamental to the deal? And so on. It is sensible to set those terms out in a ‘terms sheet’ or ‘heads of agreement’ (Heads). This is generally a non binding document setting out the intention of the parties, albeit it will often contain some binding obligations such as who picks up the costs if the deal aborts, exclusivity and confidentiality. If you have not managed to get the investors to sign up to a formal confidentiality agreement or non disclosure agreement (a two way confidentiality agreement), then try to do so at this stage.


You are entitled to take advice and should do so. If the investors and their advisers prepare the first drafts of the main documents, remember these will possible. It is highly likely that you will have to pick up the tab for the advisers’ costs, including the investors’ advisers, so this
needs to be built into your costings. For all advisers, it is advisable to try to agree the scope of the work they will undertake and a price upfront.


The investors will raise inquiries about the business, the assets, the company, the management team etc. It is essential that you and your advisers deal with this efficiently, in writing, and in full and clear detail. If your house is
in order, this process should be relatively painless. You will also need to keep your business plan and forecasts up to date. Read more about investors here


INVESTMENT AGREEMENT (OR SHAREHOLDERS’ AGREEMENT) – this will contain, for example, warranties about the business to be given by you; control issues, namely things which cannot be done without the investors’ consent; board meeting formalities and structure; restrictive covenants; access to information provisions; and exit related provisions.

NEW ARTICLES FOR YOUR COMPANY – this deals with share rights, what happens on a transfer of shares (pre-emption rights, ‘bring /drag along’ provisions, deemed transfers, permitted transfers, possibly good leaver/bad leaver provisions) etc and should otherwise dovetail the Investment Agreement.

SERVICE AGREEMENTS – for all executive directors and key management. DISCLOSURE LETTER – your ability to qualify the warranties.


If there are tax considerations such as EIS, then it is essential things are done in the correct order or the investor may not qualify for EIS relief.


Set a realistic timescale for the process and completion. Once the documents and batting order are agreed you can complete the investment and then concentrate on delivering the growth.