An indication of interest and a letter of intent are two steps of the same negotiation and the difference between them is exclusivity. The indication keeps several buyers in play; the letter narrows to one. A seller who understands that difference will not skip the first step.
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The indication of interest
Non binding, a price range rather than a number, the structure in outline, the source of funding and the diligence expected. It asks for more information and it asks for nothing exclusive. Several arrive at once in a run process, which is exactly the point: they can be compared, and comparison is what sets the price.
The letter of intent
A single number or a tight mechanism, the structure settled, the working capital and deferred consideration outlined, a diligence list, and a request for exclusivity that is usually binding. From signature the buyer is your only buyer, so everything you care about should be in it.
Why the order matters
Leverage peaks between the indications arriving and the letter being signed. A process that goes straight to a letter with one buyer has skipped the part where price is set by competition, and it hands the timetable to the person who benefits from taking their time.
Questions people ask about ioi vs loi
Do I always get an IOI first?
In a run process, usually. From an individual buyer approaching directly, often not, which is one reason a single unsolicited approach rarely produces the best price.
Can I ask for indications from several buyers?
Yes, and setting a common deadline for them is normal practice. That is what makes them comparable.
Is an IOI worth anything if it is non binding?
It tells you the range a funded buyer will work in and the assumptions behind it. That is information you cannot get any other way.