| HBS Case Collection
(Revised from original 2007 version)
Evaluating M&A Deals: Accretion vs. Dilution of Earnings-per-share
When discussing the pros and cons of an acquisition, practitioners often talk about the impact of the deal on the buyer's earnings-per-share (eps). An acquisition is said to be "accretive" if the buyer's eps goes up post-deal; it is "dilutive" if the buyer's eps goes down. Describes why managers are concerned with accretion and dilution; how to tell if a deal is accretive; why high P-E buyers can pay a premium and still have an accretive deal; how accretive deals can be bad (and dilutive deals good); and how much accretion or dilution to expect based on the terms of a deal.
Keywords: Business Earnings;
Mergers and Acquisitions;