The Definitive Guide to an Indication of Interest

An Indication of Interest (IOI) is a preliminary, non-binding document expressing a party's serious interest in pursuing a transaction, such as acquiring a business. The IOI is less formal than a Letter of Intent (LOI) and serves as an initial step in the negotiation process. Key features of an Indication of Interest include:

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Expression of Interest:

• Clearly states the party's interest in pursuing a potential transaction.

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Proposed Terms:

• Outlines key terms of the proposed deal, including the purchase price range, structure of the transaction, and any other significant financial considerations.

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Assumptions:

• Highlights any conditions or assumptions that the party is making in expressing interest.

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Confidentiality Commitment:

• Typically includes a commitment to maintaining the confidentiality of the information shared during the negotiation process.

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Non-Binding Nature:

• Clearly specifies that the IOI is non-binding, meaning that the party is not legally obligated to proceed with the transaction based on the terms outlined in the document.

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Due Diligence:

• Expresses an intention to conduct further due diligence to assess the feasibility and risks associated with the transaction with the intention of submitting a formal LOI.

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Exclusivity (Optional):

• May include a provision requesting exclusivity, meaning the seller agrees not to negotiate with other potential buyers for a specified period.

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Timing and Process:

• Provides an estimated timeline for completing due diligence and progressing to the next stages of negotiations.

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The IOI is a tool used by potential buyers to communicate their serious interest in a transaction and to initiate discussions with the seller. It allows both parties to gauge the feasibility of a deal before investing significant time and resources in more detailed negotiations. While the IOI is non-binding, it sets the stage for the development of a more detailed agreement, a Letter of Intent (LOI), if the parties decide to proceed with the transaction.
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