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Most industries have unique acronyms which are used as shorthand for complex concepts, processes, documents, and organizations. These abbreviations can be significant time savers when commonly understood and properly used, but can also create delay and confusion when not. Investment banking is no exception, and some of the key acronyms relating to critical documents in the sales process are IOI, CIM, VDR, LOI and PA.

An Indication of Interest (IOI) is a formal but non-binding submittal made by potential buyers who have read the comprehensive overview of the business in the Confidential Information Memorandum (CIM) and wish to deepen their understanding of the company and may ultimately consider making an offer. It expresses an intended price range, the form of consideration, the proposed structure of the sale, any financing and required approvals, and identifies the buyer’s advisors. Once all IOIs are received, the seller and their investment banker will select which buyers they want to advance to the next phase to include management presentations, site visits and access to a Virtual Data Room (VDR) containing key documents and records of the business.

The next step is to obtain Letters of Intent (LOI’s) which are more formal offers to purchase the company upon definite pricing, terms, and conditions. These are usually submitted after the selected buyers have been given access to sections of a VDR and have had site visits and management presentations. LOI’s are typically not binding, other than terms of exclusivity, often 45-90 days during which the buyer is allowed to conduct exhaustive due diligence and the seller agrees does not talk with any other buyers.

Toward the end of the exclusivity period, the buyer and seller will negotiate the terms of a definitive Purchase Agreement (PA) based on the terms outlined in the LOI. The PA sets forth all details of the transaction and closing process and culminates in completion of the sale.

We hope this review has been informative. We are not a law firm, and nothing contained herein should be construed as legal advice; rather this is intended as a summary of key documents in the selling of a business based on our 21 years of experience selling middle market aerospace and defense companies.

Have a great day everyone.

Kevin Gould
Managing Director, Aerospace