What is an IOI in healthcare M&A?
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.
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Definition
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.
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 by the deadline the seller's advisor sets, giving a valuation range (for example, 7x to 9x trailing EBITDA), cash and rollover split, main assumptions, and timeline. The seller evaluates IOIs and invites the strongest buyers to management meetings. After meetings, the seller requests LOIs with specific numbers and exclusivity. FOCUS Investment Banking describes the same two rounds in its healthcare processes: short-form indications of interest to narrow the field, then letters of intent from the top parties. 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 give up bargaining power, because the first buyer who signs exclusivity has a negotiating advantage that compounds during diligence. An IOI round adds weeks to the timeline. In return the seller sees several bids side by side while every buyer still has to compete.
Most FOCUS sell-side processes run two rounds of offers: short-form indications of interest to narrow the field of buyers, then letters of intent from the top parties.
Source: FOCUS Investment Banking: Breaking Down the FOCUS Sell-Side Process (Jul 2025)
What this means for clinic owners
From Sorso
A common unforced error in a practice sale is taking the first unsolicited call from a PE firm straight to an LOI. Even a light IOI round with a few buyers costs some weeks, and in return you see what several buyers would pay before any of them gets exclusivity.
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How do PE firms value medical practices?
Private equity firms value a medical practice as a multiple of its trailing-twelve-month adjusted EBITDA, and the multiple rises with scale. Published ladders run from 2.5–4x for a single owner-operated physical therapy clinic (Breakwater M&A) to 10x–20x for large primary care platforms (Scope Research), and payer mix, growth and owner dependence move a practice within its band.
Should I sell my practice to private equity?
Selling to private equity makes sense if you want partial liquidity, want to grow with capital and infrastructure, and are willing to operate as a partner rather than sole owner; it is wrong if you want full retirement or full operational autonomy.
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 mostly 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. The exclusivity and confidentiality clauses are the parts that usually bind.
How long does it take to sell a medical practice?
Selling a medical practice to a PE buyer usually takes about six to nine months from hiring an advisor to closing. FOCUS Investment Banking says its healthcare sell-side process typically takes 6 months, and broker Raincatcher puts a clinic or small-group sale at six to nine months: preparation and valuation in months one to two, marketing and offers in months two to five, and diligence, licensing and closing in months five to nine.
Founder of Sorso and a CFA charterholder. Before Sorso, Stan spent 19 years in corporate finance at institutions including UniCredit and Société Générale — managing a $450M loan portfolio and making senior partner at a major mezzanine lender by 29 — then built a fractional CFO firm exclusively for outpatient healthcare clinics.
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