Understanding M&A: Accretion/Dilution Analysis for Beginners
2025-08-30
M&A
Valuation
Technical
• 1 min readA simple explanation of accretion/dilution analysis, a key concept in mergers and acquisitions (M&A).
What is Accretion/Dilution?
Accretion/dilution analysis is used to assess the impact of an acquisition on the acquirer's earnings per share (EPS).
Accretion
An accretive deal is one where the acquirer's EPS increases after the acquisition.
Dilution
A dilutive deal is one where the acquirer's EPS decreases after the acquisition.
How to Calculate It
The analysis involves comparing the pro-forma EPS of the combined company to the acquirer's standalone EPS.
Why it Matters
Accretion/dilution is a key metric for evaluating the financial merits of an M&A transaction.