Context:
A consortium of banks led by Union Bank of India has received 17–18 expressions of interest (EoIs) for the sale of ₹728.58 crore in stressed loans of Sahara Hospitality Ltd, which operates the Sahara Star Hotel in Mumbai.
What is an Expression of Interest (EOI)?
An Expression of Interest (EOI) is a non-binding document that a potential buyer shares with a seller in the early stages of a mergers and acquisitions (M&A) process. It signals a serious intent from the buyer to acquire the seller’s business, subject to due diligence and final agreement. While not legally binding, it lays the foundation for further negotiations and due diligence by outlining the proposed terms and expectations of the buyer.
Key Concept of Expression of Interest (EOI)
- Purchase Price
- States the total consideration the buyer is willing to pay on a cash-free, debt-free basis.
- May include components for ESOPs, bonuses, severance.
- Terms are non-binding and subject to revision based on further evaluations.
- Valuation Methodology
- Includes the basis for valuation such as financial projections, historical data, and assumptions like:
- Accuracy of seller’s financials
- Fully funded retirement benefits
- Normal working capital
- Seamless transfer of contracts without extra payments
- Includes the basis for valuation such as financial projections, historical data, and assumptions like:
- Due Diligence
- Requests access to conduct due diligence across finance, legal, HR, technology, facilities, and more.
- Ensures the buyer is fully informed before proceeding to a definitive agreement.
- Transaction Structure
- Clarifies whether the buyer seeks a full acquisition or a carve-out.
- Describes assets, liabilities, and earn-out arrangements.
- Explains funding method: internal reserves or bank financing.
- Management Retention Plan
- Outlines intentions for retaining key senior management and proposed incentives.
- Transition and Support Services
- Requests post-transaction support from the seller for a specified time without additional cost beyond the purchase price.
- Approvals Required
- Notes that deal closure is subject to buyer’s board approval, aligning timelines accordingly.
- Conduct of Business
- Asks the seller to continue operations in the normal course and to notify any major changes that could affect valuation or terms.
- Transaction Expenses
- Specifies that each party will bear their own costs related to legal, financial, and due diligence processes.
- Confidentiality
- Prohibits sharing of buyer’s identity or deal details without written consent.
- Disclosure allowed only post-signing of definitive agreements.
- Non-Binding Nature
- Clarifies the EOI is not legally binding.
- No party can claim damages or force the other to proceed with the deal based on the EOI.
