Indication of Interest (IOI)
An indication of interest, or IOI, is a preliminary proposal in which a potential buyer outlines the price, structure or other key terms it may be willing to pursue in an acquisition.
Why the term matters
IOIs are commonly used in auction processes to screen buyers before granting broader data-room access or moving them into later bid rounds. They are often non-binding and may state a single price or a valuation range, identify financing assumptions, describe transaction structure and list diligence conditions. An IOI can be revised as additional information becomes available.
Where an IOI fits in a sale process
An IOI usually appears before a definitive agreement and often before the bidder has completed full diligence. In a competitive sale, the seller or its adviser may distribute process instructions, receive preliminary proposals, compare them and decide which bidders advance to a second round.
SEC merger proxies filed in 2026 show bidders submitting preliminary IOIs, receiving additional data-room access and later revising price as diligence progressed.
The price can be a range
A preliminary IOI may quote a range because the bidder has not yet validated earnings, working capital, debt-like items or other valuation inputs. A tighter or higher bid is not automatically superior if it is paired with more conditions or less financing certainty.
As information improves, the bidder may narrow the range, increase or reduce price, or withdraw.
IOI versus LOI
An IOI is usually an earlier expression of acquisition interest. An LOI generally appears after more negotiation and can include a more developed framework for exclusivity, diligence, structure and documentation.
The terms are not legally standardized, however. Some market participants use them differently. The substance of the document matters more than the label.
Why sellers care about more than price
A seller evaluating IOIs may compare cash versus stock consideration, committed financing, diligence requirements, regulatory risk, expected closing timing, management conditions and the bidder’s ability to execute.
A nominally higher bid can be less attractive if the probability of closing is materially lower.
Common mistakes
Reading an IOI as a firm offer Most preliminary IOIs are expressly non-binding and subject to further work.
Comparing only the top-line price Execution risk and financing can matter as much as a small valuation difference.
Assuming the first bid predicts the final price Competitive processes often produce multiple revised proposals before a definitive agreement is signed.
Example
A seller asks first-round bidders for non-binding IOIs. Buyer A proposes $28 to $30 per share, subject to financial, legal and commercial diligence. Buyer B proposes $31 per share but requests more financing time. The seller may advance one or both bidders based on value, certainty and process terms rather than price alone.
Example
A seller asks first-round bidders for non-binding IOIs. Buyer A proposes $28 to $30 per share, subject to financial, legal and commercial diligence. Buyer B proposes $31 per share but requests more financing time. The seller may advance one or both bidders based on value, certainty and process terms rather than price alone.
Professional note
An IOI is best read as a probability-weighted signal, not a commitment. Price, financing certainty, diligence scope, required approvals and requested exclusivity all affect how credible the proposal is.
Related terms
- Financial Sponsor
A financial sponsor is an investment firm—commonly a private equity firm—that raises and manages capital, acquires or invests in companies, and exercises ownership or governance influence with the goal of increasing investment value before an eventual exit.
- Strategic Buyer
A strategic buyer is an operating company or corporate acquirer that purchases another business because the target may create strategic value through products, customers, technology, geography, cost synergies or other operating benefits.
- Trade Sale
A trade sale is the sale of a portfolio company to an operating company or strategic corporate buyer, typically as a private negotiated acquisition rather than a public-market listing or a sale to another financial sponsor.
- Letter of Intent (LOI)
A letter of intent, or LOI, is a preliminary transaction document that records the principal terms on which parties intend to pursue a deal before negotiating and signing definitive agreements.
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