An indication of interest, or IOI, should give you enough information to compare preliminary proposals without treating any proposal as a signed deal. Ask each bidder to state the proposed price or enterprise value, valuation assumptions, form of consideration, transaction structure, financing source and commitment status, diligence completed, key conditions, expected timing, and approvals required. Also request the assumptions behind the number, including treatment of debt, cash, working capital, management rollover, and contingent consideration. The IOI should identify the buyer and authorized contact, but it should remain subject to verification and definitive documentation. Use a consistent response format, protect confidential information, and have qualified legal and financial advisers review terms that affect your transaction.
Start with a comparable price and valuation basis
The first job of an IOI is to make the bidder's economic proposal understandable. Ask for a specific price, a range, or an enterprise value, and ask the bidder to state which one it is using. A range can be useful at an early stage, but the bidder should explain what would move the proposal toward the high or low end.
Enterprise value and equity value are not interchangeable. CFA Institute describes enterprise value as the market value of debt, common equity, and preferred equity less cash and investments [3]. If a bidder quotes enterprise value, request the bridge to the amount the owner would receive. That bridge should identify assumed debt, cash, debt-like items, working-capital adjustments, and any other purchase-price adjustments. The exact definitions belong in the process instructions and later documents, but the IOI should expose the assumptions early.
Ask the bidder to identify the financial information and period used for the valuation. If the proposal relies on adjusted earnings, request a schedule of the adjustments rather than accepting an unexplained multiple. A comparable IOI lets you test whether bidders are valuing the same business on the same information.
Describe what is being bought
The IOI should state whether the bidder proposes to buy equity, selected assets, or another defined interest. It should identify subsidiaries, real estate, intellectual property, contracts, working capital, and other assets included or excluded. It should also say whether the buyer expects the existing owners to retain or roll over part of their equity.
This distinction can materially change the headline number. In a public filing describing preliminary IOIs, bidders proposed different scopes, including purchases of all outstanding shares and purchases of assets, with different consideration and value descriptions [2]. Requesting scope in a standard format prevents an asset proposal from being compared casually with a whole-company proposal.
Ask for the proposed treatment of outstanding options, shareholder loans, leases, seller notes, earnouts, and other obligations when relevant. If the bidder has not decided, the IOI should say so. Unstated exclusions are not neutral because they can shift value or risk into later negotiation.
Spell out the form and timing of consideration
A cash proposal is easier to compare than a proposal that combines cash, stock, rollover equity, seller financing, or contingent consideration. Ask the bidder to identify each component, when it would be paid, and what conditions could reduce or delay it. If stock is proposed, request the type of security, the valuation reference, transfer restrictions, and the information needed to assess it. Those terms may require specialist review.
For an earnout or other contingent payment, ask for the metric, measurement period, payment date, control over the business during the period, and dispute process. For seller financing, ask for principal, interest, maturity, security, subordination, and repayment conditions. The IOI need not contain final contract language, but it should not hide material consideration in a single headline number.
A useful response template separates upfront value from deferred or conditional value. That makes it possible to compare certainty of proceeds as well as the nominal proposal.
Identify financing and whether it is committed
Ask who will fund the transaction and what evidence supports that statement. The answer may involve the buyer's balance sheet, debt financing, equity partners, refinancing, or a combination. Request the status of lender discussions, equity commitments, financing conditions, and the amount that still depends on future approval.
A preliminary IOI is not necessarily an actionable bid. In Kohl's disclosed sale process, preliminary indications stated values but were non-binding, lacked committed financing, and remained subject to diligence. Later process steps sought committed financing and binding documentation [1]. This illustrates why an owner should score financing certainty separately from price.
Do not ask for unnecessary confidential information from a bidder, but do ask for enough evidence to understand execution risk. A process letter or adviser can specify acceptable evidence. Financing terms can change with markets and diligence, so a statement that financing is available is not the same as a commitment that can close.
List assumptions, diligence status, and information requests
The bidder should list the assumptions supporting its proposal. Common categories include revenue or margin normalization, working capital, capital expenditures, customer or supplier concentration, tax attributes, employee arrangements, litigation, regulatory matters, and ownership of important assets. The point is not to make the IOI a full diligence report. The point is to reveal which facts the bidder has assumed and which facts could change value.
Request a short diligence status report. It should say what records the bidder has reviewed, which management discussions have occurred, what remains open, and what additional information it needs. The owner can then distinguish a number based on a real review from a number based only on a teaser or summary financials.
Set a source-of-truth rule for the process. Financial figures should tie to identified statements or schedules, and any adjusted metric should have a reconciliation. Keep a versioned assumptions log so that changes are visible to the owner and advisers.
Make conditions and approvals visible
Ask the bidder to identify conditions to moving from an IOI to a definitive proposal and then to closing. These may include confirmatory diligence, financing, investment committee approval, board approval, regulatory review, third-party consents, key employee arrangements, or negotiation of definitive documents. The list will vary by transaction and jurisdiction, so it should not be treated as a universal legal checklist.
The wording matters. A condition described as routine may give a bidder broad discretion if it is not defined later. Ask whether the bidder expects exclusivity, a break fee, a no-shop, access rights, or other process protections at the IOI stage. Such terms can limit your ability to seek alternatives and should be reviewed by qualified counsel before acceptance.
Keep the distinction between an IOI, a letter of intent, and a definitive agreement clear. Some provisions in an otherwise non-binding document may be intended to bind the parties, depending on the wording and applicable law. Do not rely on a label alone.
Request a credible path and a clear point of contact
A useful IOI should include the bidder's expected timetable from further diligence through signing and closing. Ask for the proposed diligence period, management meetings, financing milestones, documentation schedule, approvals, and target closing conditions. A timetable is not a promise, but it helps expose whether the bidder has thought through the work required.
Request the names and roles of the people authorized to speak for the bidder, along with the proposed decision process. The owner should know who can answer questions and who can approve changes. This is especially important when a sponsor, operating partner, lender, or co-investor will share responsibility for the transaction.
Use stopping conditions. For example, decide in advance that a bidder will not receive broader access if its scope, financing evidence, or confidentiality protections remain materially unclear. Human reviewers should approve each access step.
Use an evaluation grid, not just the highest number
Compare IOIs across several dimensions: value, certainty of consideration, financing, fit with the proposed structure, diligence depth, conditions, timing, confidentiality posture, and likelihood of a workable definitive agreement. A lower headline number may be stronger if it contains fewer assumptions or less conditional value. Conversely, a high number may deserve limited access until its financing and assumptions are tested.
Record open questions and send the same clarification questions to similarly situated bidders where practical. Keep a written log of responses, revised proposals, and who approved additional disclosure. This creates a disciplined process without assuming that every transaction should follow the same timetable.
An IOI is a filter for deciding which bidders warrant the next level of access. It is not a substitute for diligence, valuation analysis, legal review, or a definitive purchase agreement.
Build the workflow around accountable human review
A practical workflow has an owner for each check. The deal lead can confirm that every IOI uses the requested template. The financial reviewer can reconcile enterprise value to expected equity proceeds and test the bidder's assumptions. Counsel can review confidentiality, exclusivity, binding language, and jurisdiction-dependent issues. The owner or authorized decision-maker should approve changes to the access level and process timetable.
Software can help organize versions, permissions, source records, and comparison fields, but it does not decide whether a bidder is credible or whether a term is acceptable. If AI is used to extract terms, require a human to compare the extracted text with the original IOI, flag missing or ambiguous fields, and stop automated processing when the source is incomplete or confidential handling is uncertain. Do not permit automated outreach, negotiation, approval, or disclosure.
Acquivo gives business owners the entire sell-side process an investment bank would run, as software, with no success fee. It is user-operated software, so the accountable owner and advisers decide what to request, verify, share, and accept. Acquivo is a software platform that delivers the entire sell-side M&A process, valuation, marketing materials, buyer matching, and deal management, on one platform for business owners, M&A attorneys, and boutique investment banks.
Key Points
- Request a price or value range and the valuation basis, then ask for the bridge from enterprise value to expected equity proceeds.
- Define the purchased scope, including equity or assets, retained interests, debt-like items, and material exclusions.
- Separate cash, stock, rollover equity, seller financing, and contingent consideration, with timing and conditions for each.
- Treat financing status as a separate evaluation factor and distinguish an IOI from a committed, actionable bid.
- Require assumptions, diligence status, conditions, timetable, and authorized contacts in a consistent response format.
- Use human review, controlled permissions, and stopping conditions before granting broader access or accepting process restrictions.
Sources and references
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Educational information, not individual legal, tax, or investment advice. Consult qualified professionals for your circumstances. Acquivo provides software, not representation or negotiation on your behalf.