Are IOIs worthwhile?

searcher profile

February 02, 2022

by a searcher from Harvard University - Harvard Business School in Alexandria, VA, USA

Hi everyone, I just kicked off a self funded search, https://www.sage-succession.com/. Are other searchers finding IOIs to be useful in gauging price expectations early? Or do you prefer to discuss price verbally and go straight to drafting an LOI if the deal meets your criteria? I've heard varying opinions on the topic. Thanks!

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commentor profile
Reply by a searcher
from Georgetown University in District of Columbia, USA
It depends on the deal. If it's broker driven, one of your first questions during an introductory email/meeting/call should be "what's the deal process? Any IOI/LOI deadlines?" Since you're self-funded, you're likely going to be looking at smaller companies with a <$7M purchase price and the deal process at that part of the market tends to not have an IOI stage, the broker just fields LOI offers whenever and there isn't much of a structured process. If it's a proprietary find, skip straight to an LOI. There's no need to confuse a small business owner with the difference between an IOI and an LOI.
commentor profile
Reply by a searcher
from The University of Chicago in Washington, DC, USA
On the proprietary side, it's usually played out as 1) verbal price / multiple, 2) email or IOI with a bit more on structure and terms on one page, and then 3) LOI. It all depends on the sellers familiarity with the deal process. When the seller doesn't have a ton of deal experience I've tried not to overwhelm with too much detail too soon. I'd recommend having templates of models, IOIs, and LOIs so you can respond quickly and also not forget a major point.
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