What is an Indication of Interest?

An indication of interest (IOI) is a buyer's expression of interest in buying a security that is yet to be approved or issued. IOI is a conditional agreement and a non-binding interest often stated by a buyer. When a buyer is interested in buying a security that is undergoing the registration process, or yet to be approved by the SEC, it is an indication of interest.

How does an Indication of Interest Work? 

An indication of interest (IOI) is otherwise called an expression of interest. It is often used in the purchase of securities to describe the interest of a buyer in purchasing a security that is not yet approved by the SEC. Buyers generally express interest before an initial public offering (IPO). This interest is conditional and non-binding because a security that is still in the registration process cannot be sold. 

IOI contains details such as the type of security, the interest of the investor in buying or selling, the price of the security among other information. IOIs are treated on a first-come, first-served basis because in certain cases, the number of investors that show interest in buying security can be more than the issue.

IOI in Mergers and Acquisitions

IOI is also used in the context of merger and acquisition, when used in this regard, it takes a slightly different approach from when used for investments. When used in a merger and acquisition, and IOI is non-binding, it states the interest of an acquiring company (buyer) in purchasing a company. The core elements of an IOI when used for mergers and acquisitions are;

• It must clearly state the buyer's interest.
• It contains the prude range.
• The IOI contains the source of financing the merger and acquisition.
• Expected Timeframe of the transaction, among other elements.