What is an Expression of Interest?

The expression of interest (EOI) is essential in the dealing process. It is a transparent procedure that can make a deal successful. In this article, we will examine the EOI. You will learn how to form an EOI, its applications and all its essential details.

What is an Expression of Interest?

An Expression of Interest (EOI) from a buyer for a seller planning to sell a business, asset, or security. EOI is a formal document that shows the buyer’s intention and will. It also contains a range of currencies for purchasing the asset. It is customarily a short-term, non-binding, unconditional contract with elements like a purchase price agreement, valuation, and settlement period. The purchase gains tell that the potential buyer is enthusiastic about the merger of his firm with the seller and is willing to draw out the purchase offer at a particular price.

What Is the Structure of EOI?

First, EOI says a few words of appreciation for the company’s superb products. The need to know the buyer’s view and aspiration in advance is the essence of the EOI. In addition to that, the company also canvasses requests from prospective bidders and curtails the offers referred to match their preferences. Here is the list of points that an EOI should contain:

Purchase Price

Conclusively, this segment mentions the total payment or the purchase price that the purchaser will pay either in cash or debt-free. At the same time, it is the valuation that the buyer is ready to pay after the deal is sealed. There are extra features here: finances, offers, contract terms, employees’ stock ownership plans (ESOPs), etc. Once the EOI is presented, no party can be held legally responsible for anything, even if the deal has no way of being executed as per the seller’s pricing expectations.

Valuation Methodology

The various intended buyers can be nominated as the people who do valuations in different ways. Consequently, in EOI, the method applied to the valuation must be referred to IEA. These points should be mentioned in the valuation methodology:

• The confidential information memorandum should contain all past financial records that are up to date and without any errors.
• The seller company projections should always be optimistic and faithful.
• All contracts, including employee, vendor, facility, and customer agreements, should be given to the buyer free of charge.
• The working capital amount should be enough to finance our business till the date of the sale.
• The seller needs to fund all retirement benefits themselves during the same time as closing.

Due Diligence

The EOI must express the buyer’s intention to undertake due diligence. The longevity of the business is not guaranteed. Mastering this area involves studying critical items like sales and marketing, human resources, legal elements, contracts, machines and equipment, technology, facilities, etc.

Transaction Structure

The paragraph indicates the buyer’s potential interest in a full or partial acquisition. Generally, buyers prefer to acquire an entire business, but in some cases, they may like to buy a particular division. Information about the payment source (cash or credit) is also included.

Management Retention Plan

In this part, the potential buyer describes whether they want to retain the existing management structure or an entirely new one.

Transitional and Support Services

The buyer may ask the seller to offer some support services, change existing ones, or the buyer may redesign them to start running the business efficiently. There is no additional expenditure for the buyer in this particular case.

Approval Of Transactions

In this stage, the buyer informs the seller of the acceptance process they wish to use. The EOI would entail the board of directors signing the papers to seal the deal.

Business Ethics

Here, the seller describes his arrangements and terms for the buyer to keep the business running in its current state. When the seller decides to change the way of their business, the buyer has to be informed about it.

Transaction Expenses

This clause contemplates that each party is accountable for any transaction costs. These include negotiation, due diligence, writing legal agreements, leveraged deals, professional services, and more.

Confidentiality

This section guarantees the buyer that the terms and clauses will not be disclosed to any other party without his written authorisation. The buyer also requests that the seller not disclose their identity or purchasing information to anyone without permission.

Non-Binding Agreement

This part explains the term EOI as a non-commitment agreement. One needs to demonstrate the buyer’s genuine interest in purchasing a particular product, achieved by a formal offer letter. This letter will, as usual, conclude with the buyer thanking the seller for their time and attention and providing their contact information.

Applications of EOI in Different Areas

The EOI document is not just a piece of formal document. It can help different sectors in different ways. Here are the applications of EOI in other ways:

• Business—It sets the ground rules for those interested in delivering a statement of qualifications (questionnaire) on the seller’s capability to extend his supply of required goods and services.
• Mergers and Acquisitions—The buyers need to show their intention to buy the security at the range they are willing to pay for by the stipulated time and their sources of funds.
• Securities – Investors who want to buy securities will consider expressing interest on the envisioned initial public offering (IPO) date. Conversely, a case could be made for a purely private market in this regard, with no laws or agencies needed to approve equities.
• Employment—This job application letter allows you to exhibit your competence to do and suit the post proudly posted in this job advert by the organisation. The document has distinctive professional objectives illuminating how a candidate is suitable for a job where their interests, capacities and performance are fully aligned with those of the job.
• Lease of Commercial Space- Property owners or developers utilize EOIs to gather information from potential tenants interested in leasing the space.

Overall Dealing Process through EOI in Real Estate

Submitting an EOI in real estate dealing is beneficial. It represents how much a buyer is interested in your property. Dealing with EOI is effective, but it is pretty time-consuming. Dealing with EOI in the estate is a long process with many stages. Here is an example of the EOI dealing process of a real estate business.

Invitation for EOI

Firstly, developers announce the come-on through an expression of interest in EOI during the pre-launch phase of development. The EOI period is considered a 10-30 day window by rule of thumb. Developers communicate with would-be buyers through social media channels such as WhatsApp and email campaigns.

EOI Submission

Developers can submit the EOI during the launch validity time frame. Commence your EOI by enumerating the crucial points which you will include, namely, the expected purchase price, financial arrangements and settlement period.

Evaluation

Developers review the EOIs they received to compare the attractive locations and then prove market demand. This assessment tends to give a picture to the property investors of the selling price and type of clients.

Engagement

When engaging with customers who put up EOIs, developers consider them based on when their suggestions appeared. Terms and conditions relate to the summit price, layout, and similar real estate points of view.

Decision

On this last note, the buyer makes the final decision after ensuring that both parties agree with the main terms and other conditions. A letter of acceptance regarding the seller’s proposal to conclude the EOI is given.

Registration

This calls for a formal offer and depositing a down payment as a surety, followed by property registration.

Advantages of EOI in Real Estate

Expression of Interest in real estate has many benefits for potential buyers.

Early Access to Property– The EOI offers you early access to properties before they launch.

Higher Chances of Negotiation– EOI opens the door for negotiation. If the developer wants to sell their inventory faster and you have made a compelling offer, they will likely go ahead with the deal.

Promotes Transparency—EOI highlights the buyer’s interest, terms and conditions, and financial capabilities, reducing the likelihood of misunderstandings and disputes later.

Saves Time & Resources—Even from a seller’s point of view, EOI benefits them as it saves their time and the high cost of advertising the property. There is an increase in the chances of a successful deal, saving them the time and effort to promote their property.

EOI in Different sectors

Business

In business, an Expression of Interest refers to a formal process used by organizations to gauge interest from potential suppliers, partners, or contractors for a particular project, contract, or opportunity. It’s a primary step before issuing a formal Request for Proposal (RFP) or Request for Tender (RFT).

When a company is seeking to find suitable partners for its project, an EOI is a beneficial option. It is the response from the interested parties. The EOI outlines the project or opportunity, the selection criteria, and the information required from interested parties. Based on the responses received, the business can then shortlist candidates to proceed to the next stage of the procurement process.

Securities

An Expression of Interest in securities can refer to an indication from an investor or a group of investors. This indicates their interest in participating in a specific security. Their interest can be measured with the offering, such as an initial public offering (IPO), a private placement, or a bond issuance.

When a company plans to issue new securities, it may first gauge investor interest through an EOI process. Institutional investors, high-net-worth individuals, or investment firms may submit EOIs to express their interest in purchasing a certain number of shares or bonds at a specified price.

Lease of Commercial Space

In leasing Commercial spaces, submitting an EOI can demonstrate to the landlord that you are a severe prospective tenant. It may give you an advantage if multiple parties are interested in leasing the same space.

The EOI could include details such as the desired lease term, proposed rental rate, and a timeframe for finalizing the lease agreement. If the landlord finds the EOI attractive, they may negotiate with the prospective tenant to discuss the lease terms further. This could involve clarifying details, negotiating rental rates, discussing lease incentives, and addressing concerns or specific requirements. After both parties agree, they can finally sign the deal.

Tips for Writing a Good EOI

The following tips can make your expressions of interest better:

• Research the company before you express interest. Writing allows you to gain insight into the company, its products or services, and the aspects or other skills the business demands from its employees.
• Address a specific person- Study the company and start your first communication with a relevant person.
• Write concisely. Frank’s phrases are purposeful, persuasive, and well-structured. Keep your message no longer than one page to keep your reader focused.
• Proofread your article—Once you write your letter of interest, edit it to ensure it is spell-checked, grammatical and clear.

Conclusion

Hence, an expression of interest in real estate can be wielded by both buyers and sellers as they try to grapple with the not-so-easy-to-deal-with dynamic and competitive market. Whether you are a buyer or a seller, an EOI can provide some important points of reference and possibilities for thinking about the deal.

Along with the changing price landscape, an Expression of Interest is one channel that enhances the easy sale and purchase of real estate. It ensures transparency, competence, and completeness, allowing people to be informed and achieve satisfactory results for all players.