The Indication of Interest: A Buyer's First Real Offer, Explained

A non-binding document a prospective buyer sends a seller early on, to gauge whether both sides are close on price and terms. It's typically the first of three documents in a deal's progression — IOI, then Letter of Intent, then purchase agreement.

Why it matters: An IOI saves both sides real time. Before either party invests weeks in deeper conversations, financial disclosure, or legal review, the IOI answers the basic question — are we even in the same range on price and structure? For an owner fielding interest from multiple parties, IOIs let you compare buyers side by side on price range and proposed structure before committing to exclusivity with any one of them. Because it's non-binding, a seller shouldn't treat an IOI as a real offer — it's a negotiating starting point, and buyers sometimes anchor low intentionally to see how the seller reacts. Where it's most useful is on off-market or lightly marketed deals without an advertised price; once a business is listed with a price, most buyers skip the IOI and go straight to a Letter of Intent or purchase agreement.

Example: A buyer interested in a $4M logistics company sends an IOI proposing a price range of $3.6M-$4.2M, a structure of 80% cash at close with a two-year earnout on the balance, and a rough 60-day due diligence timeline. The seller uses that range to decide whether to move forward with this buyer or continue talking to two others in parallel.

An IOI usually includes a price range, proposed deal structure, seller transition plans, and a due diligence outline. It's most useful when there's no advertised price to anchor expectations; on smaller deals with a listed price, buyers typically skip straight to a purchase agreement.

Related terms: Letter of Intent (LOI), Confidential Information Memorandum (CIM), Deal Structure