Investment BankingAdvanced
Accretion / Dilution Analysis
Checking whether a deal raises or lowers the buyer's earnings per share.
Detailed explanation
Compare the buyer's EPS before the deal with the combined EPS after, including financing costs and new shares issued.
Formula
Pro forma EPS = (Buyer PAT + Target PAT + Synergies − New interest) ÷ (Buyer shares + New shares)
Why it matters
Boards and markets watch whether a deal is accretive.
Key points
- Accretive = EPS rises.
- Depends on how the deal is paid for.
- Accretive does not always mean value-creating.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.