Indication of interest (IOI)vsLetter of intent (LOI)
Both are preliminary documents from a buyer expressing interest in a target. IOI comes first and non-binding; LOI comes second and locks in an exclusivity period.
The one-sentence difference
An IOI is an early, non-binding, no-commitment expression of interest with a valuation range. An LOI is a later, more detailed document with an exact price, structure, and a binding exclusivity clause.
Side-by-side
| Dimension | IOI | LOI |
|---|---|---|
| Timing in process | 2–4 weeks after CIM sent | 4–8 weeks after IOIs, following management meetings |
| Price format | Range ($X–$Y million) | Specific number |
| Structure detail | Broad (cash / stock / earnout mix indicated) | Specific structure with mechanics |
| Binding provisions | None (fully non-binding) | Exclusivity and confidentiality are binding |
| Exclusivity | No | Yes — typically 45–90 days |
| Number sent by seller's advisor | Typical 6–15 IOIs received on well-run process | Typically only one LOI signed (with the chosen buyer) |
| Diligence at this stage | CIM + limited data room access | Full diligence begins |
When to use which
At the top of a competitive process. The seller's advisor asks all interested buyers to submit non-binding indications so a shortlist can be created without disclosing full information to every party.
Full article on Indication of interest (IOI) →After 2–3 finalists have met management, the seller's advisor typically requests best-and-final LOIs, and the seller chooses one to grant exclusivity.
Full article on Letter of intent (LOI) →What they have in common
Both include price, high-level structure, key conditions, and identify the parties. Both come from buyers to the seller's advisor. Both are subject to definitive-agreement drafting for anything binding on price.
Frequently asked
Can I skip the IOI stage?
You can in a proprietary (single-buyer) process, but you sacrifice the price discovery that comes from a competitive IOI round. Most sell-side advisors will strongly recommend running an IOI round unless the buyer is genuinely unique.
How binding is an LOI?
The price is not binding — that's subject to definitive-agreement negotiation and diligence findings. The exclusivity clause is binding: for 45–90 days, the seller cannot solicit or entertain alternative offers.