Middle Market Mergers and Acquisitions by Colonnade Advisors MM M&A 020 - Indications of Interest and Letters of Intent: Narrowing the Field
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Nov 8, 2021 Dive into the intricate world of mergers and acquisitions! Discover how indications of interest (IOIs) play a crucial role in identifying serious buyers. Learn about the transition from IOIs to letters of intent (LOIs) and the impact they have on deal negotiations. The importance of clarity in ownership stakes and financial structures is emphasized. Additionally, gain insights into managing exclusivity periods and understanding draft purchase agreements for successful deal closures. Tune in for expert strategies and tips on optimizing client results!
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Use IOIs To Gate Serious Buyers
- Ask for written indications of interest 2–3 weeks after sending the CIM to separate serious bidders from tire-kickers.
- Use a process letter with explicit format and deadlines to force commitments and set expectations.
Demand Clear Valuation Basis
- Require bidders to state purchase price and clearly define the EBITDA baseline they'll bid off.
- Ask for both a dollar range and a multiple to triangulate valuation and avoid later confusion.
Force Early Structure And Cap Table Clarity
- Ask bidders to state whether they propose an asset or equity purchase up front to avoid late-stage surprises.
- Require indication of management rollover expectations and a sources-and-uses cap table even if preliminary.