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    Corporate / M&A

    M&A Accretion / Dilution

    Whether an acquisition raises or lowers the acquirer’s earnings per share, after synergies and the cost of financing the cash portion. Accretion is not value creation — a low-multiple target is accretive even when the deal destroys value.

    Accretion / dilution-9.10%Acquirer EPS$2.50Pro forma EPS$2.27
    Accretion / dilution
    -9.10%
    Dilutive
    Acquirer EPS
    $2.50
    Standalone
    Pro forma EPS
    $2.27
    After the deal
    Consideration
    $1,800,000,000
    debt $900,000,000
    EPS bridge
    Synergies are after tax and taken in full in year one.
    EPS bridge
    ItemValue
    Acquirer EPS$2.50
    Target EPS$1.50
    Pro forma EPS$2.27
    Accretion$-0.23
    New debt$900,000,000
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    Accretion against synergies
    Synergies are what make a high-multiple deal work.
    Accretion against synergies-13.62-10.70-7.77-4.85-1.921.00002020404060608080M&A Accretion / Dilution
    Canonical equations
    The exact relationships implemented by this engine.

    (E_a + E_t + S(1−t) − i·D(1−t)) / (N_a + N_new) · Synergies and financing after tax.

    EPS_pf − EPS_a · The percentage change.

    finance methodology

    A clear path from inputs to results.

    Whether an acquisition raises or lowers the acquirer’s earnings per share, after synergies and the cost of financing the cash portion. Accretion is not value creation — a low-multiple target is accretive even when the deal destroys value.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Set acquirer earnings ($m).
    2. Set acquirer shares (m).
    3. Set target earnings ($m).
    4. Set target shares (m).
    5. Read the headline metrics, then check the table for the detail.

    The formula

    (Ea+Et+S(1−t)−i⋅D(1−t))/(Na+Nnew)(E_a + E_t + S(1−t) − i·D(1−t)) / (N_a + N_new)

    Reference: Pro forma EPS after synergies and financing cost (Brealey, Myers & Allen, Principles of Corporate Finance).

    Worked example

    At the default inputs

    Inputs
    • Acquirer earnings ($M): 500; Acquirer shares (M): 200; Target earnings ($M): 60; Target shares (M): 40; Offer price per share ($): 45; Pre-tax synergies ($M): 30; Cash share of consideration (%): 50; Cost of new debt (%): 5.5; Tax rate (%): 25; New shares issued (M): 40
    Calculation path
    1. 1

      Accretion / dilution: -9.10% · Acquirer EPS: $2.50 · Pro forma EPS: $2.27 · Consideration: $1,800,000,000

    Result

    Accretion / dilution: -9.10% · Acquirer EPS: $2.50 · Pro forma EPS: $2.27

    Interpreting the result

    The deal is dilutive by 9.10%, taking EPS from $2.50 to $2.27.

    Assumptions & limitations

    • Synergies are after tax and in full in year one.
    • No transaction fees or purchase accounting.

    Frequently asked questions

    Is accretion the same as value creation?

    No — a low-multiple target is accretive even when the deal destroys value.

    Why is financing cost after tax?

    Interest is deductible, so the net cost to earnings is lower.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.