What is an indication of interest?
An indication of interest, or IOI, is a short letter in which a buyer states a preliminary, non-binding valuation range for a company, typically after reading the CIM and before any management meeting. Nothing in an IOI obligates the buyer to transact.
The IOI’s real function is admission. A sale process uses IOIs to decide which buyers earn management meetings, so the document is the buyer’s application for a seat in round two, priced in a range wide enough to preserve options.
Windsor Drake covers the founder-facing version of this moment, receiving and reading a specific letter, on the indication of interest page.
What is a letter of intent?
A letter of intent, or LOI, is the document a chosen buyer signs after management meetings, stating a specific price and structure with a closing timeline. The price terms are non-binding, but the exclusivity clause is binding: the seller agrees to stop talking to every other buyer.
Buyers ask for 30 to 90 days of exclusivity as a standard opening position, and Windsor Drake recommends conceding 30 to 45 days, because exclusivity is the point where negotiating power transfers to the buyer.
The founder-facing treatment of a live letter, including which terms to negotiate before signing, sits on the letter of intent page.
How do the IOI and LOI rounds fit into a run process?
A Windsor Drake process opens with a buyer universe of 150 to 300 potential acquirers. The IOI round is the first filter: buyers that studied the CIM submit ranges, and those ranges cut the field to a shortlist that earns management meetings.
The LOI round converts the shortlist to one buyer. After meetings, the remaining bidders submit final letters with firm prices, and the seller signs a single LOI, granting exclusivity and ending the auction.
Both rounds sit in the middle of the 6 to 10 month calendar described in Windsor Drake’s sell-side process guide. Preparation precedes them, and confirmatory diligence follows the signed LOI.
The timing is predictable. Outreach and the IOI round together take 6 to 10 weeks, and management meetings plus LOI negotiation run another 4 to 8 weeks before exclusivity begins.
What does each document commit each side to?
| Dimension | IOI | LOI |
|---|---|---|
| Timing | After the CIM, before management meetings | After management meetings, before confirmatory diligence |
| Price form | A valuation range | A specific number with deal structure |
| Binding effect | Non-binding throughout | Price non-binding; exclusivity and confidentiality binding |
| Exclusivity | None; the seller keeps talking to every buyer | 30 to 90 days requested; 30 to 45 days is the recommended concession |
| Buyer’s commitment | Continued attention, nothing more | Diligence spend, often six figures across QoE and legal |
| Seller’s commitment | A management meeting slot at most | Silence toward every other buyer while exclusivity runs |
| Purpose | Earn the buyer a seat in round two | End the auction |
The asymmetry matters. An IOI costs the buyer nothing, while a signed LOI costs the seller the entire auction, and roughly 1 in 3 signed LOIs fail to close on their original terms, with the failure paid for in seller time and lost competitive tension.
Why does the difference matter most with a single inbound buyer?
A buyer that approaches a founder directly skips the IOI stage entirely. There is no field to filter, so the buyer’s first real document is an LOI carrying binding exclusivity, often delivered with a deadline attached.
That jump is the strategy. Exclusivity signed before any market check locks in 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, and that gap runs 15 to 25 percent of enterprise value.
A founder holding a direct approach should treat the missing IOI round as the warning sign, starting with the resources at Windsor Drake’s offer-received hub and the assessment of whether a banker is needed before signing anything with an exclusivity clause.
How should a founder read an IOI valuation range?
Read the midpoint, never the top. The top of an IOI range is marketing designed to win a management meeting, and buyers walk ranges down as diligence proceeds far more often than they walk them up.
The midpoint is the honest signal of where the buyer expects to transact, and the bottom of the range is the number the buyer will defend if the process loses tension. An advisor comparing IOIs across a shortlist reads them as a distribution and schedules the meetings accordingly.
Range width is also information. A narrow range signals a buyer that has done real work, while a range wide enough to mean anything signals a buyer keeping a costless option open.
Founders who already hold an inbound letter, whether it is labeled an IOI or an LOI, can have Windsor Drake build a compressed competitive process around it through Approach Response.
Questions founders ask
Is an indication of interest binding?
No. An IOI is non-binding in every respect. It states a preliminary valuation range and the buyer’s interest in continuing, and its practical function is to earn the buyer a management meeting in the next round of the process.
Is a letter of intent binding?
Partially. The price and structure terms in an LOI are non-binding, but the exclusivity and confidentiality clauses bind the seller. Signing an LOI ends the seller’s ability to talk to other buyers while exclusivity runs.
How long does LOI exclusivity last?
Buyers ask for 30 to 90 days as a standard opening position. Windsor Drake recommends conceding 30 to 45 days, because a shorter window keeps diligence disciplined and limits the time the seller spends with zero competitive tension.
Can the price change after an LOI is signed?
Yes, and in practice it moves down rather than up. Roughly 1 in 3 signed LOIs fail to close on their original terms, with diligence findings used to justify a retrade once the seller has dismissed every other buyer.
Does a single inbound buyer submit an IOI?
Usually not. A buyer in a bilateral approach skips the IOI stage and moves straight to an exclusivity-bearing LOI, because there is no auction to earn a seat in. That jump is how The Proprietary Discount gets locked in.
What should an IOI contain?
A valuation range with the assumptions behind it, the intended deal structure, the financing source, key diligence requirements, and an indicative timeline. An IOI missing the assumptions behind its range gives the seller no way to compare it against other bids.
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/process/ioi-vs-loi/