VC GLOSSARY

An indication of interest (IOI) is a formal, yet non-binding letter or document expressing interest in purchasing either a company or a company's securities.

Both of these purposes may seem similar, but they in fact belong to two separate financial spaces. The first falls under the mergers and acquisitions designation, whereas the second is confined to that of securities and investments.

An indication of interest passes from an interested party to a potential seller as a means of soliciting additional information on the investment or purchase opportunity. The exact manner in which interest is expressed or presented and information is supplied in response depends on the purpose of the original indication of interest.

In the case of securities and investments, an indication of interest passes from a prospective buyer to their broker regarding a security that has yet to complete registration with the Securities and Exchange Commission (SEC).

Their broker must then provide a summary or prospectus of the investment vehicle's characteristics, and the indication is passed on to the company in question. Preceding an IPO, an indication of interest does not necessarily ensure a prospective buyer will be able to participate.

Indications of interest achieve a similar purpose in the mergers and acquisitions space to that of their securities and investments counterparts. However, they generally take the form of a formal letter for this purpose.

The buyer drafts the letter to make their intentions known, normally specifying a price range within which they are willing to make a deal and precisely what assets they are looking to acquire.

An indication of interest is an underwriting expression or document stating a party’s desire to purchase a company or a company’s securities. An IOI is conditional and non-binding.

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