What Is an Indication of Interest (IOI)?
An IOI is the first written bid in a sale process. After reviewing the CIM, interested buyers submit a short letter, often two to four pages, expressing interest and proposing a valuation, commonly stated as a range such as 400 to 450 million dollars on a cash-free, debt-free basis. Because it comes before detailed diligence, everything in it is explicitly non-binding.
Beyond price, an IOI typically describes the buyer's financing plan, its key assumptions about the business, the internal approvals it would need, and its proposed timeline. For financial sponsors, it may also outline how much equity the fund would commit and which lenders it expects to work with on the debt financing.
How IOIs Are Used in an Auction
In a two-round auction, the bank sets a first-round bid deadline and collects IOIs from all interested parties. The deal team then builds a bid summary comparing valuation ranges, financing certainty, strategic fit, and execution risk, and the seller selects a shortlist, often three to six buyers, to advance to management presentations and full data room access.
Buyers face a strategic tension at the IOI stage: bid too low and you are cut from the process, but bid too high and you may struggle to justify the price after diligence, inviting an awkward retrade later. Experienced buyers submit ranges wide enough to preserve flexibility while strong enough to stay in the room.
IOI vs. LOI and Why It Matters
The IOI and the letter of intent bookend the middle of a sale process. The IOI is a first-round, lightly informed expression of interest based mostly on the CIM, while the LOI arrives after management presentations and data room access, stating a firmer price and typically requesting exclusivity. Moving from IOI to LOI marks the transition from a wide auction to a chosen buyer.
Interviewers frequently ask candidates to walk through a sell-side process from start to finish, and placing the IOI correctly, after the CIM but before second-round diligence, shows genuine process fluency. On the buy side, drafting IOIs teaches junior professionals how to frame a valuation before full information is available.
