IOI (Indication of Interest)

An IOI (Indication of Interest) is a non-binding document, prior to the LOI, by which a buyer expresses interest in acquiring a company and states indicative terms: range of enterprise value (e.g. EBITDA multiple), proposed consideration structure, key assumptions, and, if applicable, a request for exclusivity. It is less detailed and less committed than a LOI: it does not fix the final price nor oblige the parties to close; it allows the seller or advisor to filter offers and decide which buyer(s) to advance to the negotiation and LOI-signing phase. In Mexican M&A processes with CIM and multiple offer rounds, the IOI is the buyer’s first formal response after reviewing the teaser and CIM.

What does an IOI contain?

A typical IOI includes the following elements, in brief non-binding form:

• Indicative enterprise value: A range or a point (e.g. 4.0–4.5× normalized EBITDA, or enterprise value of MXN X–Y), subject to confirmation after due diligence.
• Proposed consideration structure: Approximate percentages of cash at closing, seller note, and contingent consideration, without detailing tenors or rates.
• Assumptions: Normalized EBITDA used, treatment of working capital, assumed debt and cash, and any relevant adjustment the buyer considered.
• Conditions to advance: Access to additional information, data room, meetings with management; in many cases, a request for exclusivity for a period if the buyer is selected for the next round.

The IOI does not replace the CIM or the teaser: the buyer bases its indication on information already received (teaser, CIM, and sometimes a first round of questions). If the seller advances with that buyer, the LOI will specify the terms and add binding clauses (exclusivity, confidentiality).

How does the IOI differ from the LOI?

In a typical process:

1. The seller receives several IOIs and selects one or two buyers.
2. Grants access to the data room and/or management meetings.
3. Negotiates the LOI with the chosen party; the LOI leads to due diligence and drafting of the definitive agreement.

When and why is an IOI presented in Mexico?

In sale processes with CIM and offer rounds, the buyer delivers its IOI once it has reviewed the teaser and CIM (and sometimes after a written Q&A round). With several indications on the table, the seller can compare value, structure, and conditions and decide with which bidder(s) to negotiate the LOI.

In bilateral sales or when the buyer is already known, the parties may skip the IOI and go straight to negotiating a LOI, because there is no competitive process to filter. The IOI is therefore a piece of the structured competitive process, not of every M&A transaction.

What do buyers and sellers ask about the IOI?

Is the IOI binding on the buyer?

No. The IOI is expressly non-binding. The buyer is not obliged to close the transaction or to maintain the value or structure indicated; it may withdraw or change its position at the next stage. What it does include are confidentiality commitments (if an NDA was not signed separately) and sometimes a statement that the information used is only to evaluate the transaction. The first document that contains binding clauses (exclusivity, confidentiality, governing law) is the LOI.

What does an IOI typically contain in an M&A process in Mexico?

Indicative enterprise value (range or point, e.g. 4.0–4.5× normalized EBITDA), indicative consideration structure (approximate percentages of cash at closing, seller note, contingent consideration), main assumptions on which the indication is based (assumed normalized EBITDA, working capital, debt and cash), principal conditions the buyer would expect (access to due diligence, exclusivity for a period if it advances), and sometimes the expected timeline to close. It does not include detailed legal language or representations and warranties; that is left for the LOI and the definitive agreement.

When do you move from IOI to LOI?

When the seller chooses one or two buyers with whom it wants to negotiate exclusively or in parallel, and the buyer is willing to formalize. The LOI is negotiated on the basis of the IOI: enterprise value, consideration structure, exclusivity period, and closing conditions are specified. The move from IOI to LOI is accompanied by an exclusivity period during which the seller does not negotiate with others, in exchange for the buyer investing in due diligence and contract preparation. If the parties do not close a LOI, the process may reopen to other bidders.

In what types of sale processes in Mexico are IOIs used?

In structured processes where the seller or its advisor sends a teaser, then a CIM to buyers who signed an NDA, and receives offers in one or two rounds. The first round of offers is in IOI format; based on them, the buyers who advance to the next phase (data room access, management meetings) and eventually to LOI negotiation are selected. In bilateral sales (a single known buyer) the IOI is sometimes skipped and the parties go straight to negotiating a LOI, because there is no competitive process to filter.