IOI or LOI: Which One Should You Submit?

If you're an entrepreneur looking to buy a lower middle market business, knowing the difference between an IOI (Indication of Interest) and an LOI (Letter of Intent) is essential. Each plays a key role in the acquisition process, and using the right one at the right time can streamline negotiations.

IOI (Indication of Interest) An IOI is the first step. It’s a non-binding document that shows your interest in purchasing a business, including high-level details like potential price, deal structure, and timeline. It’s a way to test the seller’s interest without fully committing.

Use an IOI to:

• Show initial interest
• Share basic investment terms
• Start discussions

LOI (Letter of Intent) An LOI comes later, after initial conversations and serious interest. It’s a more detailed, but still mostly non-binding document outlining your intent to buy, including due diligence timelines, financial terms, and exclusivity expectations.

Use an LOI to:

• Formalize discussions
• Outline next steps
• Show serious intent

Which Comes First? Always start with an IOI, especially if you're considering multiple targets or need more info to refine your offer. Once expectations align, submit an LOI to move forward with due diligence.

Understanding these steps can simplify your acquisition process and build trust with sellers.