Indications of Interest (“IOIs”) were briefly introduced in Deal Note® 115. While IOIs are non-binding, most include a handful of key terms of the proposed transaction such as price, consideration, structure, financing, and timing. The key takeaway from this Deal Note® is that the basic terms agreed between the buyer and seller in the IOI will likely be carried forward into the formal Letter of Intent, and ultimately the Purchase Agreement.
While an IOI is not legally binding, they should not be taken lightly, for the reason last noted. Unfortunately, we know of many cases where sellers have been disappointed and/or deals have been terminated, because the price declined substantially, and key terms changed from the IOI to the LOI and ultimately to the final Purchase Agreement. We strongly recommend that you, as a seller of a middle market aerospace and defense company, take IOIs seriously and have them carefully reviewed by experienced M&A bankers as well as legal counsel.
Have a great day,
Ryan Kirby
Junior Partner
