EOTB Analysis During Mergers and Acquisitions: A Brief Guide

EOTB analysis is one of the lesser known methods of examining a company during a merger or acquisition (though the term is most often associated with acquisitions over mergers). So what is EOTB analysis? Can you perform it on your own? And, most importantly, what’s its goals?

These are great questions, especially if someone is looking to purchase your business and merge it with their own.

In this guide, we’ll start with the very basics then continue to give a high-level overview of what EOTB analysis is and how it works inside the acquisition process.

Let’s get going.

EOTB stands for ‘eyes of the buyer,’ and it basically means looking at the deal at hand through the buyer’s eyes to examine what it is about your business that they feel will give their pre-existing business a boost.

In his book, Mergers and Acquisitions from A to Z, Thomas Nelson sums up EOTB analysis succinctly by saying:

“In preparing for the sale of a company, the seller and its advisory team should conduct a strategic EOTB analysis, where EOTB means ‘eyes of the buyer.’ What will buyers see when the due diligence veil is removed? What value drivers will they really see? How does the acquisition of your company solve a problem or create a significant opportunity for them?”

He also goes on to say that, in order to perform a great EOTB analysis, the seller shouldn’t hide any details or create any surprises for the acquiring team.

As he puts it:

“The EOTB analysis should be done on a ‘no-holds-barred, no sacred cows’ basis, with candor and integrity as the guiding principles. At no point should the EOTB session resemble the children’s fable ‘The Emperor’s New Clothes.’ The seller must be honest and non-defensive as well as strategic throughout this process.”

In summary, EOTB analysis is a way of closely identifying what your business – the one that is being acquired – has that the buyer wants. This analysis has to be performed honestly for the deal to actually work.

This is a great question because, at first, you may be wondering why you need to understand what your business has whenever it’s being sold anyway. Does it matter? Should you really spend all of this time concerning yourself with a deal that has already been thoroughly considered by the other side?

Yes! EOTB analysis helps you understand your business’s worth, allowing you to bring an accurate valuation to the table when its negotiation time. If you don’t understand why a company wants to buy your company, you won’t be able to get the best deal possible.

This is why you need to understand fully – and honestly – why the company wants to acquire you. If you don’t, you may under sell.

The honesty part is still important, though. You need to be completely honest with yourself when conducting an EOTB analysis to not oversell your business as something that it’s not. At the end of the day, EOTB analysis is a way to make sure everyone gets what they want.

You will have a better view of your business, what its valuation is, and what problems it fixes for other businesses in your market.

An EOTB analysis can also help you strategically sell your business. While most examples of EOTB analysis frame it as something a business does when they are being approached by potential buyers, you have to look at the other side of the coin, too. What if you want to sell your business? How would you do so if you do not fully understand what your business looks like from the eyes of the potential buyers. It’s pretty much sales 101.

Like any business-related analytics strategy, the internet is awash with various ways to conduct an EOTB analysis. This is a great thing because it allows you to customize how your process will go. However, because of that, we will only look at a few high-level questions here to get the process started.

We recommend you consider looking for outside help when it comes to issues like this, too. There, as always, experts in every field for you to lean on when you need to.

Anyway, on to the questions.

When you’re evaluating different companies using EOTB analysis, you should first ask yourself: How does our business add value to their business?

This is a simple question yet it strikes at the core of what EOTB analysis is meant to do. What about your business practices would be alluring to an outside competitor? Do you have proprietary software or patents? Do you you perform a task extremely well, better than most of your competitors?

To answer this question you need to look at what parts of your business work extremely well for you but are lacking for the other business. Then, by being honest with yourself, examine what areas of your business could be a potential good fit for another business to own.

Next, ask yourself: what does your business do that would shore-up revenue streams for the other business? This goes hand-in-hand with question one, but it helps by taking the question and applying to actual revenue goals.

The third question: Does your business fill in any gaps? This means: is there an audience that the other business can’t reach but you can? Is there a service you offer that the other company doesn’t want to develop? Things of that nature. In short: what does your company have – in the sense of product, staff, clients, etc – that the buyer doesn’t.

The final, high-level EOTB analysis question is a simple one: Is the other business looking to fill in gaps in their workforce?

This final question is equally important, though it can feel a lot less exciting than to understand that your business practices have created something so groundbreaking that someone is willing to purchase the whole business from you. But, still, you need to consider if the buyer is looking to fill out its upper management team or creative team or really any other team that they may be lacking now.

When all of these questions are answered, you will find that you’ve learned quite a bit about your organization and what makes it valuable to other companies outside of a simple valuation.

In the end, performing an EOTB analysis is a great way to understand what your business has that your competitors or others in your space lack. You basically want to answer the question: what do you have that they don’t?

This can help you accurately negotiate if someone wants to acquire your business and will also help you plan a sale if you’d like to in the future.

After you perform the simple EOTB analysis with the questions above, you can always lean on experts to help you conduct a more thorough examination of your company.

Josh Hrala

Josh is an HR journalist and ghostwriter who's been covering outplacement and offboarding for over six years. Before pivoting to the HR world, he was a science journalist whose work can be found in Popular Science, ScienceAlert, The Huffington Post, Cracked, Modern Notion, and more.