An indication of interest (IOI) is a short, non-binding written expression of a buyer's appetite for a target, submitted in the first round of a sell-side process after the buyer has reviewed the CIM. Its job is to let the seller's adviser short-list the most serious and best-priced bidders before incurring the cost of deeper engagement.
What an IOI states
An IOI is usually one to three pages and covers:
- Valuation range — expressed as a range rather than a single number, often as an enterprise value band or an EBITDA multiple (for example, "$45–52M, roughly 7.5–8.5× LTM Adjusted EBITDA").
- Form of consideration — cash, stock or mix; use of earnouts, seller notes or rollover.
- Structure — preference for asset or stock deal.
- Financing — sources and whether the bid is financing-contingent.
- Conditions and approvals — major assumptions, board approval, key diligence areas.
- The buyer's credentials — who they are and why they are a logical owner.
Why the range is non-binding
Because the buyer has seen only the CIM — a seller-drafted marketing document — its IOI value is necessarily provisional. The range gives the buyer room to move once it has tested the numbers in management meetings and diligence. Sellers know the top of the range is aspirational and the binding number will come later in the LOI — but the IOI still reveals which buyers see the most value and which structures they prefer.
IOI vs LOI
| IOI | LOI | |
|---|---|---|
| Round | First | Second |
| Price | A range | A specific number |
| Detail | High level | Detailed terms |
| Diligence done | CIM only | + management meeting, prelim review |
| Exclusivity? | No | Usually granted |
How the adviser uses IOIs
The adviser compares IOIs not only on headline price but on structure (cash vs contingent), certainty (financing, approvals, track record of closing) and fit (a strategic buyer may pay more but pose antitrust or confidentiality risk). The strongest few are invited to management presentations and second-round data-room access, then asked to submit LOIs. A buyer that low-balls the IOI may simply never be invited back — so the IOI is a genuine competitive moment, not a formality.
See also
- Letter of intent — A preliminary document outlining the main terms of a proposed deal, mostly non-binding.
- Confidential Information Memorandum — The detailed marketing document that follows the teaser. Usually 30–80+ pages covering business overview, market, financials, customers, employees and growth opportunities.
- Management presentation — A live or virtual meeting between short-listed bidders and the target's management team. Often the first interaction between buyer and the operating leaders.
- Sell-side M&A process — The deal cycle from the seller's perspective: preparation, marketing materials, buyer outreach, IOIs, LOIs, exclusivity, due diligence, definitive agreement and closing.
- Exclusivity — A binding period (usually 30–90 days) within an LOI during which the seller agrees not to negotiate or accept competing offers, while the buyer completes diligence.
- Enterprise value — The total value of a company’s operations, independent of its capital structure.
External resources
Practitioner guides from Main Street Wealth, the M&A advisory firm that sponsors M&Apedia (how this works):
- Complete M&A Process Timeline — Stage-by-stage walkthrough of a transaction from preparation to closing.