Module V· Accretion / Dilution - MechanicsAdvanced

Question

Walk me through accretion / dilution: classic 30-second final-round drill.

Answer

Start with acquirer standalone EPS. Build combined net income: acquirer net income plus target net income plus after-tax synergies, minus after-tax financing costs, lost interest, PPA amortization, and other run-rate deal adjustments. Build pro-forma shares, including new shares issued. Divide combined net income by pro-forma shares. If combined EPS is above acquirer EPS, the deal is accretive; if below, dilutive.

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