Indicative Offer: The Non-binding Price in the M&A Process

An indicative offer is a non-binding offer from a prospective buyer. It stands at the beginning of the sales process, after the interested party has received the teaser and the information memorandum. In German it is called indikatives Angebot; in English, non-binding offer, NBO for short.

The indicative offer does not yet bind the interested party. It can withdraw later or adjust its parameters. For the seller it is nevertheless valuable: it shows who is seriously interested and at what order of magnitude.

How a structured bidding process in a company sale is built and how we support it can be read on our service page.

How binding is an indicative offer in legal terms?

An indicative offer does not bind the bidder because it expressly excludes the commitment – but obligations of consideration arise with the negotiations themselves, and an effective purchase of GmbH shares requires notarial form anyway.

The interplay of the provisions is sober:

Provision	Content	Significance for the indicative offer
§ 145 BGB	Whoever proposes a contract is bound by the proposal, unless the commitment has been excluded.	The note “unverbindlich” (non-binding) or “non-binding” excludes the commitment. Without it, a statement can in case of doubt mean more than intended.
§ 154 BGB	As long as the parties have not agreed on all points that one side wants to regulate, the contract is in case of doubt not concluded.	An agreement on the price alone is not yet a purchase contract.
§ 311 para. 2 BGB	The very commencement of contract negotiations creates duties of consideration.	Even without commitment to the price, duties apply, for instance on the handling of information received.
§ 15 paras. 3 and 4 GmbHG	Assignment of shares and the obligation to do so require notarial form.	An offer made by e-mail cannot effectively bind the sale of GmbH shares.
§ 76 para. 2 GmbHG (Austria)	Transfer of shares and agreements on the obligation of future assignment require a notarial deed (Notariatsakt).	In Austria the same logic applies via the notarial deed.

Statutes retrieved on 24.09.2026 at Gesetze im Internet and in the RIS.

That the price is non-binding does not mean that nothing binds. The confidentiality agreement signed before the information memorandum continues to apply. How far individual clauses of an offer or of a later LOI take legal effect should be reviewed by a lawyer in the individual case.

Definition and timing

The indicative offer follows the first information phase. The sequence before it is customary: anonymous teaser, confidentiality agreement (NDA), then information memorandum. On this basis the interested party gives its first assessment.

The order is important. The indicative offer rests on publicly available information and on information provided in the memorandum. It is not yet backed by a due diligence. That is why it is subject to reservations.

How robust such a figure becomes depends on one's own preparation. Those who know the valuation range before the first offer recognise an outlier offer immediately.

Content of an indicative offer

A robust indicative offer is more than a figure. It states its bases. Usual components:

• Price range: a realistic span instead of a fixed amount.
• Price basis: whether the figure refers to the enterprise value or to the purchase price for the equity, and whether “cash-free, debt-free” is assumed.
• Assumptions: the bases of the valuation, such as assumed earning power or net debt.
• Purchase price mechanics: locked box or reference-date balance sheet, share of fixed payment, earn-out or retention.
• Reservations: conditions such as a successful due diligence, approval of corporate bodies or regulatory clearances.
• Financing: how the purchase is to be financed, for instance own funds or debt, and how far the financing is committed.
• Structure and timetable: rough idea of deal structure and process.
• Management and employees: what role the seller is to play after closing.

The range is chosen deliberately. It gives the interested party room to refine the offer after the review. At the same time it forces it to disclose its assumptions. How a valuation comes about is explained by us under what is my company worth.

So that these points become comparable, the seller specifies them in a process letter. Those who have every bidder answer the same questions in the same order compare offers instead of wordings.

Worked example: three offers, one decision

The following example is constructed to show the trade-off. It does not describe a mandate.

A services company receives three indicative offers in the first round:

Feature	Bidder A (financial investor)	Bidder B (competitor)	Bidder C (family holding)
Price range (enterprise value)	EUR 15–17 million	EUR 13.5–14.5 million	EUR 12.5–13.5 million
Share fixed at closing	70 %, 30 % as an earn-out over three years	100 %	90 %, 10 % retention for 18 months
Financing	Bank financing, not yet committed	Own funds	Own funds
Reservations	Due diligence, financing, corporate bodies	Due diligence, merger clearance	Due diligence
Role of the seller	Management for three years	Transition over six months	Advisory board

At first glance A leads. If the earn-out is taken out, only EUR 10.5 to 11.9 million is certain at closing – less than with B and C. In addition there is a financing reservation.

B pays in full at closing, but may need clearance from the Federal Cartel Office (Bundeskartellamt). Merger control applies in Germany, among other cases, if the companies involved together achieved more than EUR 500 million of revenue worldwide and, domestically, one party more than EUR 50 million and another more than EUR 17.5 million (§ 35 GWB). Whether this applies can be clarified before the next round.

C offers the least, but with the lowest uncertainty.

Which choice is right depends on what matters more to the seller: the highest possible amount, the certain amount at closing or the future of the company. In such cases it often makes sense to take several bidders into the second round and to ask A to specify the earn-out share and the financing.

Distinction: indicative offer, LOI, binding offer

The three terms mark different levels of commitment.

Feature	Indicative offer (NBO)	Letter of intent (LOI)	Binding offer
Timing	before due diligence	often after first review	after due diligence
Commitment	non-binding	predominantly non-binding, often with binding individual parts	legally binding
Level of detail	rough, range	more detailed, key points	concrete, fixed price
Typical binding parts	generally none	often exclusivity, confidentiality	entire core
Function	pre-selection of bidders	framework for the negotiation	basis of the contract

A letter of intent can contain individual binding elements, such as exclusivity or confidentiality, even if the core remains non-binding. The legal effect in the individual case should be reviewed by a lawyer.

Role in the process and timing

In a bidding process the indicative offer fulfils a filtering function. The seller receives several offers and can compare. It decides which interested parties go into the next round and obtain access to the in-depth review.

In this way the circle of bidders is narrowed in an orderly manner before sensitive data are disclosed. This protects discretion and saves time. How this phase fits into the overall process is shown by the process of a company sale.

When the offers are below your own expectation

This happens more often than sellers expect. According to the DIHK-Report Unternehmensnachfolge 2025, 36 percent of the previous owners advised by the IHKs demand an excessive purchase price; in IHK counselling there are, arithmetically, more than two companies for every person interested in a takeover. The basis is over 50,000 contacts of the IHKs in 2024.

If all indicative offers are close together and below one's own expectation, this is a statement by the market, not a negotiating tactic of the bidders. Three reactions are then more sensible than a break-off:

1. Compare assumptions: What earning power and what net debt do the bidders assume? Often the difference lies in the adjustment, not in the multiple.
2. Supply missing information: If a bidder underestimates recurring revenue or the order backlog because the memorandum does not evidence them, this can be corrected.
3. Negotiate structure instead of price: Retention, earn-out or vendor loan can close a gap that cannot be closed through the fixed price.

Most effective is to narrow the gap before the process. Those who establish sale readiness before the first offer round – adjusted figures, documented customer relationships, a management that does not hang solely on the owner – obtain narrower and more robust ranges.

Indicative offer, LOI, binding offer: what distinguishes the offer stages is summarised in the M&A glossary.

Frequently asked questions

Is an indicative offer binding?

No. It is expressly non-binding; under § 145 BGB the commitment to a proposal lapses if the offeror excludes it. The interested party can withdraw from the process or adjust its parameters after the review. The purchase becomes binding only with the notarially certified purchase contract.

How does the indicative offer differ from the LOI?

The indicative offer is more general and stands at the beginning. The letter of intent is usually more detailed, often comes after a first review and can contain individual binding elements, such as exclusivity. Both are non-binding at their core.

Why is a price range named instead of a fixed price?

Because the offer is made before due diligence. The interested party does not yet know all the details. The range gives it room to refine the price after the review and at the same time forces it to state its assumptions.

Does the figure in the offer refer to the purchase price I receive?

Not necessarily. Many offers state an enterprise value on a “cash-free, debt-free” basis. What you receive as a shareholder results only after deduction of net debt and after adjustments for working capital. Ask expressly about the price basis in the process letter.

What happens after the indicative offer?

The seller selects on the basis of the offers which interested parties advance. They receive access to due diligence. A binding offer and the negotiation of the purchase contract generally follow.

Should one always prefer the highest indicative offer?

Not necessarily. A high price with vague assumptions, a large earn-out share or uncertain financing can fall later. Structure, reservations, financing certainty and probability of completion count just as much as the figure.

How the agreed company value becomes the amount actually paid out is shown in Purchase price mechanics in a company sale.