What is an IOI in healthcare M&A?
An IOI (indication of interest) is an early-stage, non-binding expression of buyer interest that typically states a valuation range, structure, and diligence requirements, used by sellers to narrow the field before requesting LOIs.
Quick answer
An indication of interest (IOI) is a non-binding preliminary bid, usually providing a price range rather than a specific number, submitted after a buyer reviews the confidential information memorandum but before full diligence or LOI.
The detail
IOIs and LOIs are often confused but serve different purposes. An IOI comes first. The seller distributes a confidential information memorandum (CIM) to a short list of buyers under NDA. Interested buyers submit IOIs within 2 to 4 weeks, giving a valuation range (for example, 7x to 9x trailing EBITDA), cash and rollover split, key assumptions, and timeline. The seller evaluates IOIs and invites 3 to 6 buyers to management meetings. After meetings, the seller requests LOIs with specific numbers and exclusivity. IOIs let a seller compare bids side by side without any buyer locking in exclusivity. Sellers who skip the IOI stage and go straight to LOI lose leverage, because the first buyer who signs exclusivity has a negotiating advantage that compounds during diligence. The extra 6 to 8 weeks an IOI round adds to timeline usually pays for itself several times over in final clearing price.
A competitive process with multiple IOIs typically lifts final clearing price 15 to 30 percent versus accepting the first unsolicited offer.
Source: AICPA M&A practice guidance
IOI-to-LOI conversion rates in healthcare M&A typically run 40 to 60 percent, with the seller narrowing to 3 to 6 bidders for the LOI round.
Source: ABA Business Law Section
What this means for clinic owners
From Sorso
The single biggest unforced error in a practice sale is accepting the first unsolicited call from a PE firm and going straight to LOI. Running even a light IOI process with three buyers will cost you 60 days and almost always returns that time back in a materially higher price.
Related questions
How do PE firms value medical practices?
Private equity firms value medical practices primarily on a multiple of trailing twelve-month adjusted EBITDA, typically 5x to 12x, with the multiple driven by scale, growth, payer mix, and provider retention.
How do I evaluate a PE offer?
Evaluate a PE offer on six dimensions: enterprise value multiple, cash at close percentage, rollover equity terms, post-close compensation structure, earnout conditions, and platform exit timing assumptions.
What is an LOI in healthcare M&A?
A letter of intent (LOI) in healthcare M&A is a non-binding agreement that sets the proposed purchase price, structure, exclusivity period, and diligence timeline before a buyer commits the resources to close a deal.
How long does it take to sell a medical practice?
Selling a medical practice to a PE buyer typically takes 6 to 12 months from engagement to close, with 2 to 3 months of prep, 1 to 2 months of marketing, 2 to 3 months of diligence and negotiation, and 1 to 2 months for definitive documents and closing.
Founder of Sorso. 19 years in corporate finance. Managed a $450M loan portfolio before building a fractional CFO firm exclusively for healthcare clinics.
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