In the business world, what is ioi stands for “indication of interest.” An IOI is an early stage non-binding step in transaction processes such as mergers and acquisitions or securities offerings. It indicates that a potential buyer is interested in moving to the next phase of the process and supports the fluidity of financial transactions.

IOIs often include key information such as the approximate price range that a buyer may be willing to pay (whether expressed as a dollar value or multiple of EBITDA), the buyer’s general availability of funds and sources of financing, the proposed management retention plan post-transaction, the scope of required due diligence items, and the expected timeline for closing. A well written IOI can help weed out “tire kickers” and ensure that your time is spent with buyers who are genuinely serious about buying your company.

Jared Gossett, Managing Director of Mergers and Acquisitions at George & Company states that IOIs should also be used to evaluate the level of buyer understanding of your company and its inherent risks and opportunities. Ultimately, this is the most important component of the IOI because if a buyer doesn’t understand your business well enough to make an informed purchase decision, they probably won’t follow through with a LOI and close on a deal.

One of the most common reasons transactions fail to close is due to differing value expectations between buyers and sellers. Having the ability to quickly weed out buyers who are not in your target price range and that don’t have the resources to finance a purchase should be a high priority for you.