Business Acquisitions: The Indicative Bid

Business Acquisitions: The Indicative Bid

The indicative bid is a critical milestone in the acquisition process. It is a non-binding offer that provides the seller with a first formal indication of the buyer’s valuation, interest, and proposed terms. A well-prepared indicative bid sets the stage for further negotiations and due diligence.

This article outlines the key components that should be included in an indicative bid and why they matter.

Key elements of an indicative bid

A well-formulated indicative bid should include the following elements:

1. Buyer profile

Include a brief introduction to the buyer: the company’s business, size, and market position.Explain the strategic rationale for the acquisition — why the buyer is interested and how the target fits into long-term goals. Common drivers include synergies, geographic expansion, product diversification, or access to new technology.

2. Valuation and commercial terms

• Valuation: State the proposed valuation of the target company and the key assumptions behind it.
• Purchase price structure: Clarify how the price will be paid (e.g., upfront cash, earn-out, seller financing) and what ownership stake is being acquired.
• Reinvestment: Specify whether the seller is expected to reinvest in the buyer or retain a minority stake in the target company.

3. Future plans

Outline the buyer’s vision for the target company after the acquisition. This may include growth initiatives, product development, expansion, or restructuring.
Explain how the target will be integrated into the buyer’s operations and what synergies are expected.

4. Role of the seller

Clarify the seller’s expected role post-transaction. Will they remain operational, take on an advisory role, or exit entirely after a transition period? Setting expectations early helps avoid misunderstandings later.

5. Due diligence

Describe how the due diligence process will be conducted, including:

• The timeline
• Areas of review (financial, legal, operational, etc.)
• The advisors or parties involved

6. Other conditions

Specify any additional terms such as exclusivity periods, confidentiality requirements, or regulatory approvals.

Why the indicative bid matters

An indicative bid provides a structured framework for both parties. It formalizes the buyer’s interest, clarifies key assumptions, and sets expectations for next steps. A well-formulated bid not only reduces uncertainty but also creates the foundation for efficient negotiations and due diligence.

At FLB Partners, we support clients through the entire acquisition process — from strategy and indicative bids to integration. Contact us today to learn how we can help your company execute successful acquisitions.