What is the difference between an IOI and an LOI?
An indication of interest is a short non-binding letter, issued before diligence, stating a valuation range and the buyer’s general intent. A letter of intent comes later and states a specific price, a deal structure, and a binding exclusivity clause that takes the company off the market, with 30 to 90 days the standard exclusivity ask and 30 to 45 days the recommended grant.
The two documents transfer power in opposite directions. An IOI asks the founder for access, while an LOI asks the founder for exclusivity, and Windsor Drake breaks down the exclusivity trade at the letter of intent guide.
| Document | Binding? | What it commits the buyer to | Typical stage |
|---|---|---|---|
| Verbal expression of interest | No | Nothing | First calls |
| Indication of interest (IOI) | No | Nothing; the range signals intent to win data access | Before diligence, after initial information sharing |
| Letter of intent (LOI) | Non-binding on price; binding on exclusivity and confidentiality | Exclusivity terms, standardly asked at 30 to 90 days | After management meetings, before confirmatory diligence |
| Purchase agreement | Yes | Price, terms, and closing obligations | End of diligence |
What does the range in an IOI actually commit the buyer to?
Nothing. The range is not a price, not a floor, and not a promise, and every IOI carries language making the letter non-binding in its entirety. A buyer can later bid below the buyer’s own stated range and face no consequence beyond the founder’s reaction.
What the range buys is access. The buyer trades an attractive-looking number for the founder’s financials, customer data, and management time in the next round.
Why is the range so wide, and why does the buyer quote the top of it?
A wide range serves the buyer twice. The top of the range gets the buyer into diligence ahead of competitors who quoted honestly, and the bottom of the range gets defended later, when diligence findings arrive and the buyer explains why the final number sits low in the band.
A $20M to $30M range reads correctly as a $20M opening position with a $30M marketing headline. Founders who anchor on the top figure end up conceding from a price the buyer never offered.
How should I respond to an IOI?
Treat the IOI as an invitation to structure a process, not an offer to accept or reject. The correct response thanks the buyer, declines to negotiate the range, and states that the company will evaluate interest through an organized process on the founder’s timeline.
The IOI proves demand exists, and demand is the raw material of a competitive process. A Windsor Drake process run alongside a live approach takes 4 to 6 months, against roughly nine months for a full process, and opens with a buyer universe of 150 to 300 potential acquirers.
The cost of skipping that step is The Proprietary Discount: the gap between what a serial acquirer pays in an unbanked bilateral negotiation and what the same business clears in a competitive process, typically 15 to 25 percent of enterprise value. Windsor Drake publishes the quarterly measurement as The Windsor Drake Proprietary Discount Index.
What should I send back, and what should I withhold?
Send back what moves the buyer toward a sharper number without granting diligence access: a summary financial profile, a growth narrative, and a clear description of process next steps. Every document the founder sends should be information the founder would show all bidders.
Withhold customer names, customer-level revenue, detailed margin data, employee compensation, and anything a buyer could use to model concentration risk or to recruit against the company. Detailed data belongs in a diligence phase that follows a signed LOI at a specific price, under NDA.
How do multiple IOIs turn into a competitive process?
In a run process, IOIs are a designed round, not a surprise. An advisor sets a common bid deadline, collects IOIs from every interested buyer, and uses the spread of ranges to decide who advances to management meetings and a second round.
The orchestration is the point. A buyer who knows six parties are submitting ranges bids differently from a buyer who believes no competitor exists, and second-round bids tighten when each acquirer prices against real competition.
Does one IOI mean I should hire an advisor?
One credible IOI is the strongest signal that advisory fees pay for themselves, because a single interested buyer is exactly the situation where the bilateral gap is widest. The decision framework sits in do I need a banker, and the fee structures, retainers of $5k to $15k per month with success fees of roughly 2 to 6 percent by deal size, are detailed in what an M&A advisor costs.
More playbooks for first written interest are collected at the offer received hub. For founders holding a live IOI who want a structured response within weeks, Windsor Drake’s Approach Response engagement builds the competitive process around the interest already on the table.
Questions founders ask
Is an indication of interest binding?
No. An IOI is non-binding in its entirety, including the valuation range. The buyer can bid below the stated range later without legal consequence.
Should I accept an IOI at the top of the range?
There is nothing to accept. An IOI is not an offer, and the top of the range is a marketing figure that wins data access. The next real number arrives in a letter of intent, and without competitive pressure that number gravitates toward the bottom of the range.
What should I share after receiving an IOI?
A summary financial profile and a description of process next steps, nothing more. Customer names, customer-level revenue, and detailed margin data wait for a signed LOI and an NDA.
What is the difference between an IOI and an LOI?
An IOI states a non-binding valuation range before diligence. An LOI states a specific price and binds the founder to exclusivity, with 30 to 90 days the standard ask and 30 to 45 days the recommended grant.
Can I negotiate the range in an IOI?
Negotiating a non-binding range concedes the frame. The stronger response places the buyer into a process where competing bids, not letter drafting, move the price.
Does one IOI justify running a full process?
Yes in most cases. One IOI proves demand, and a Windsor Drake process run alongside a live approach takes 4 to 6 months while working a buyer universe of 150 to 300 potential acquirers. The bilateral alternative typically costs 15 to 25 percent of enterprise value, the gap Windsor Drake calls The Proprietary Discount.
Last reviewed July 28, 2026 by Jeff Barrington, Founder and Managing Director, Windsor Drake. Content on this page may be cited with attribution and a link to https://windsordrake.com/offer-received/indication-of-interest/