An Indication of Interest (IOI) is a preliminary, non-binding document expressing a party's serious interest in pursuing a transaction, such as acquiring a business. The IOI is less formal than a Letter of Intent (LOI) and serves as an initial step in the negotiation process. Key features of an Indication of Interest include:
Expression of Interest:
- Clearly states the party's interest in pursuing a potential transaction.
- Outlines key terms of the proposed deal, including the purchase price range, structure of the transaction, and any other significant financial considerations.
- Highlights any conditions or assumptions that the party is making in expressing interest.
- Typically includes a commitment to maintaining the confidentiality of the information shared during the negotiation process.
- Clearly specifies that the IOI is non-binding, meaning that the party is not legally obligated to proceed with the transaction based on the terms outlined in the document.
- Expresses an intention to conduct further due diligence to assess the feasibility and risks associated with the transaction with the intention of submitting a formal LOI.
- May include a provision requesting exclusivity, meaning the seller agrees not to negotiate with other potential buyers for a specified period.
Timing and Process:
- Provides an estimated timeline for completing due diligence and progressing to the next stages of negotiations.
The IOI is a tool used by potential buyers to communicate their serious interest in a transaction and to initiate discussions with the seller. It allows both parties to gauge the feasibility of a deal before investing significant time and resources in more detailed negotiations. While the IOI is non-binding, it sets the stage for the development of a more detailed agreement, a Letter of Intent (LOI), if the parties decide to proceed with the transaction.