When Is an Acquisition Accretive?

A merger and acquisition (M&A) deal is said to be accretive if the acquiring firm's earnings per share (EPS) increase after the deal goes through. If the resulting deal causes the acquiring firm's EPS to decline, the deal is considered to be dilutive.

What does an accretive acquisition mean?

What Is an Accretive Acquisition? An accretive acquisition increases the acquiring company's earnings per share (EPS). ... As a general rule, an accretive merger or acquisition occurs when the price-earnings (P/E) ratio of the acquiring firm is greater than that of the target firm.

Is there a rule of thumb for calculating whether an acquisition will be accretive or dilutive?

7. What is the rule of thumb for assessing whether an M&A deal will be accretive or dilutive? In an all-stock deal, if the buyer has a higher P/E than the seller, it will be accretive; if the buyer has a lower P/E, it will be dilutive.