Meaning and components of an indicative offer when selling a company

From: Marco Stricker

Head of Corporate Finance, Co-Head of Mergers & Acquisitions Prokurist

The so-called indicative offer, also known as a non-binding offer (NOB) or letter of intent (LOI), is an important part of the sale of a company and serves as the first decisive step in the communication between an interested party and the seller: with the NBO or LOI, interested parties express their intention to buy. The offer provides an initial estimate of the possible purchase price and is generally not legally binding.

Ideally, it leads to the initiation of the negotiation process. In this article, we take a closer look at the meaning and components of the indicative offer.


    The sale of a company: Why do you need a non-binding offer or a letter of intent?

    Selling a company is a very complex process that involves numerous steps. It is not uncommon for several months to pass before the sale is successfully completed. The indicative offer is an important part of this process.

    If a company is up for sale, there are usually several interested parties. For an effective comparison of the offers submitted by the candidates, a bidding process is often initiated by experienced M&A advisors. The interested parties can participate with an indicative, non-binding offer. The aim is to make a shortlist in the initial phase of the bidding process and invite suitable candidates to the next round.

    Parallels and possible differences to the letter of intent

    The NBO is often used synonymously with the LOI (“Letter of Intent”). Both NBO and LOI stand for an indicative offer that is submitted by the interested party early on in the transaction process. Even though both instruments serve to document an intention to purchase, there are some differences. For example, an LOI can contain special binding elements, such as exclusivity agreements. As a rule, an LOI is also more detailed.

    Use and distribution of indicative offers

    The indicative offer is submitted by the potential buyer in order to give the seller an initial impression of his purchase intentions and the possible conditions. It is a non-binding offer as a basis for the further transaction process.

    The NBO or LOI is used in the initial negotiation phase and serves as an exchange of information, a comparison tool and a basis for due diligence. When selling a company, the indicative offer plays an important role in managing the sales process and selecting potential buyers.

    Components of an indicative offer

    The elements of an indicative offer usually include the following components, which differ from binding offers:

    Buyer information:

    Presentation of the interested party including track record and current activity

    Insights into the potential successor’s plans for the company

    Purchase price:

    Determination of a price range incl. calculation basis

    Terms of payment:

    Submission of the payment conditions incl. time and financing plan

    On the basis of the indicative offer, a decision is finally made as to which interested parties the transaction process should be continued with.

    Preparation of an indicative offer

    Care should be taken when preparing an indicative offer to ensure that the offer accurately reflects the intentions of the potential buyer and to provide a solid basis for future negotiations. Important are:

    • a careful preliminary analysis of the target company,
    • Clear and comprehensible formulations,
    • a realistic valuation and
    • completeness with all material aspects of the intended transaction.

    Anyone who is shortlisted as an interested party receives more specific information about the company in the next step. This information is provided in strict confidence via a so-called data room, usually in digital form. This gives the remaining candidates the opportunity to carry out an internal due diligence check. If any questions remain unanswered, these are clarified during this phase.

    Once the NBO or LOI has been signed, an exclusivity agreement is in place for a limited period of time. This ensures that no negotiations with other interested parties are conducted in parallel. The next step is for external consultants to review specific areas (tax, legal, finance).


    The indicative offer plays an important role in the early phase of an M&A process. It serves to express and verify a potential buyer’s interest in a company and is used as a basis for further negotiations. Furthermore, the NBO or LOI fulfills an important filter function. The greater the market demand, the more extensive the examination of the indicative offers.

    Do you need advice on selling your company?

    At Conpair, we know how complex the sale of a company is and what is important when viewing and filtering indicative offers. Rely on our expertise – we will be happy to accompany you on the way to a successful deal by finding the right candidates for the purchase of your company. Get in touch today, we look forward to hearing from you!


    Marco Stricker

    Head of Corporate Finance, Co-Head of Mergers & Acquisitions Prokurist