What is an indication of interest?
An indication of interest is a buyer's first formal, written expression of interest in acquiring a target, submitted early in a structured sale process. It is non-binding and deliberately preliminary — typically a valuation range rather than a firm price, plus high-level views on structure, financing, and timing.
The IOI is the ticket to the next round. In a banker-run auction, the seller invites a broad set of potential buyers to submit IOIs after reviewing limited marketing materials; the seller then uses those indications to decide who advances to fuller diligence and a management presentation.
Because it is based on thin information, the IOI commits the buyer to almost nothing. The price is a range conditioned on diligence, and the buyer can revise or withdraw freely. Its purpose is to signal seriousness and approximate value, not to lock in terms.
Where the IOI sits in a sale process
A structured auction moves through escalating commitments, and the IOI is the first formal gate.
- Teaser and NDA. Potential buyers receive a brief teaser, sign confidentiality agreements, and get the confidential information memorandum.
- Indication of interest. Interested parties submit IOIs with a valuation range and key terms. The seller uses these to cut the field.
- Round-two diligence. Advancing buyers get a management presentation and deeper data room access.
- Letter of intent / final bid. Remaining buyers submit firmer, more detailed offers, leading to exclusivity and confirmatory diligence with the chosen party.
Each step narrows the field and raises the specificity demanded of the buyer. The IOI is broad and cheap; by the time a buyer reaches the LOI, it is committing real money and a firmer price.