Definition
Accretion/dilution analysis tests whether a proposed acquisition will increase (accretive) or decrease (dilutive) the acquirer's earnings per share. Accretive deals add value immediately. Dilutive deals destroy near-term value but may be justified by strategic rationale or long-term synergies. The analysis considers the acquisition price, financing method, and expected synergies.
lightbulb Example
Acquirer EPS is $3.00. After acquiring target and achieving synergies, combined EPS is $3.30. The deal is 10% accretive. If combined EPS were $2.85, it would be 5% dilutive.
verified_user Key Points
- Accretive = post-deal EPS increases
- Dilutive = post-deal EPS decreases
- Stock-financed deals tend to be more dilutive
- Synergies can convert dilutive deals to accretive