The NBIO, or Non‑Binding Indicative Offer, is one of the most important milestones in a structured M&A process even though, as the name suggests, it isn’t legally binding (apart from confidentiality and potential exclusivity).
The NBIO (also known as a Term Sheet, or a Letter of Intent) is a buyer’s formal, written expression of interest to acquire a business, based on the information they have reviewed to date about the business. It typically sets out the indicative valuation, deal structure (such as cash, earn‑out or equity), and the key assumptions the offer is based on, and conditions such as due diligence and board approval.
Importantly, the NBIO is not intended to finalise a deal. Its purpose is to establish alignment on the core commercial terms. While the emphasis is typically on valuation and deal structure, the more areas it addresses upfront, the lower the risk of surprises later in the process (for example, working capital principles or ongoing management staff remuneration).
In a well‑run sell‑side process, multiple buyers are encouraged to submit NBIOs at the same time. This allows the seller to assess offers on a side‑by‑side basis – not just on headline price, but on deal structure, risk allocation, certainty, timing, and strategic fit. The NBIO stage introduces competitive tension. Buyers know they are being assessed against others, which typically leads to clearer positions, improved terms, and stronger internal commitment before exclusivity is granted. This helps sellers avoid entering exclusivity prematurely.
From a deal execution perspective, the NBIO sets the commercial framework for the transaction. While due diligence may refine details, most successful deals broadly follow the principles agreed at this stage.
For sellers, the takeaway is that the NBIO is a value‑shaping moment. A well-managed NBIO process improves outcomes, reduces execution risk, and lays the foundation for a smoother path to completion.
At McKellar Partners, we manage the NBIO stage with discipline and intent, ensuring no material assumptions are left unclarified and creating competitive tension, and ensuring sellers enter due diligence with clarity and confidence.