Thoughts on a Indication of Interest (IOI)

February 08, 2024

by a searcher from Iowa State University of Science and Technology in Chicago, IL, USA

I am speaking with a seller that his company does around 80 million in revenue. I have not used a indication of interest (IOI) document before, is it worth reaching out to my law firm for that form or does any template suffice? If anyone does have a template that I am able to use that would be great!

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Reply by an intermediary
from The University of Michigan in Bonita Springs, FL, USA

Given the letter is an informal, non-binding initiation of your interest in completing a deal, I would spend more time on the softer side. Too many letters of interest are too fast into the "what" and miss out on the relationship building why's. Beyond the proposed deal structure, I would make sure to answer other questions a seller is going to have:

Who are you? Introduce yourself or your company, background, skills, etc. Discuss your experience or expertise that makes you the right partner.

Why you? Explain why you are interested in acquiring the target business. Explain what you are bringing to the table, e.g., synergies, new markets, new geography, growth strategies, operational improvements, etc..

What are you looking to do? Explain whether you are looking for a full or a partial recap, a spinout of specific assets, etc..

Where is the money coming from? Explain how you plan to finance the acquisition.

What are the next steps? Layout your proposed next steps and thank them for their time and consideration.

Reply by a searcher
from University of North Texas in San Antonio, TX, USA

^redacted‌ Crafting an Indication of Interest (IOI) or a Letter of Intent (LOI) may seem straightforward, and when properly executed, they can provide protection without incorporating binding terms. However, it is strongly advised not to proceed without legal counsel for substantial transactions with a higher enterprise value (EV). In larger deals, the language employed in these documents becomes critical, as it offers protection and conveys your position. Engaging legal expertise is essential to avoid pitfalls and ensure that the language used aligns with your strategic objectives, preventing the inadvertent disclosure of sensitive information.

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