The indication of interest

The short version

• An indication of interest, often called an IOI, is a short, non-binding note that you are interested and roughly what you might pay.
• It usually gives a price range and a rough structure, before you have seen everything.
• Brokers use IOIs to decide which buyers move to the next stage.
• It is lighter than a letter of intent and commits you to almost nothing.
• Keep it honest. A range you cannot support will come back to hurt you later.

When you use one

Some brokers ask every interested buyer for an IOI after they have read the CIM. The broker then picks a few buyers to meet the owner and make a formal offer. Other sales skip the IOI and go straight to a letter of intent.

What goes in it

• A price range, with how you arrived at it: the earnings figure and the multiple you used.
• A rough structure: cash at closing, any seller note and how you will finance.
• Your background and team, in a few lines.
• What you still need to learn, such as tax returns or customer details.
• Your timeline to a letter of intent and to closing.
• A clear statement that it is not binding.

Pricing an IOI

Base your range on what you know so far: the earnings you rebuilt and your ceiling. Give a range you could actually pay if the numbers hold up. A high range to win the next round, followed by a much lower letter of intent, damages trust with the broker and the seller.

What happens next

If the broker selects you, you will usually meet the owner, get more information and be asked for a letter of intent. Lesson B6.3 covers that.