If you're exploring the world of buying or selling a business, you’ll likely hear two terms pretty quickly: IOI (Indication of Interest) and LOI (Letter of Intent). They sound similar, and both are part of the early stages of a deal—but they’re not the same.

Here’s a plain-English breakdown to help you understand the difference and why it matters.

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Purpose

• IOI: Think of this as your “Hey, I’m interested, let’s chat!” moment. It’s a low-commitment way to express interest before doing a deep dive into due diligence.

• LOI: This is more like saying, “I’m in this for real.” It outlines what the deal could look like and kicks off the serious part of the conversation.

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Formality

• IOI: Super casual. No legal strings attached. Could be a short note or email like “I’m thinking this price range.” Maybe there’s some confidentiality if sensitive info is being shared.

• LOI: Think of it as a formal handshake with light paperwork. It usually includes structure, specifics, and even some legally binding pieces like no-shop clauses.

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Legality

• IOI: Totally non-binding. Either side can walk away. It might leave a slight impression, but nothing is official.

• LOI: Not a full-blown contract, but there can be binding pieces like “Don’t talk to other buyers while we’re negotiating.”

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Timing

• IOI: Comes early in the game—before either side has done much homework.

• LOI: Happens later, once there’s been some legwork and both parties are ready to get serious.

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In Simple Terms

• IOI: “I’m interested, let’s talk.”

• LOI: “We’re serious about this, here’s how we see it going down.”

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Content

• IOI: Very general. “I’m thinking around this price...”

• LOI: Gets into the nitty-gritty—financing structure, leadership after the sale, etc.

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Exclusivity

• IOI: Not typically discussed.

• LOI: Often includes exclusivity. That means “Let’s focus on each other for now.”

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Detail

• IOI: Gives you a ballpark.

• LOI: Gives you a specific number and clear terms.

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Practical Tips

• Let the buyer draft the LOI and then tweak it together until both sides are comfortable.

• Sellers: get a good attorney to review the LOI before signing anything.

• Keep in mind, the details can shift depending on the business or industry.

• Even with an LOI, deals can fall apart if big issues come up during due diligence.

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So, what’s the takeaway?

The IOI is like a first date—you’re just getting to know each other.
The LOI is when you start talking about moving in together—it’s serious, but not married yet.

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Whether you’re buying or selling, understanding these terms is key to avoiding surprises. Questions? Contact Us.