Accretion Dilution Analysis

Accretion and dilution analysis is a basic M&A screening tool that shows how a deal affects the acquirer’s earnings per share. It is useful because it helps bankers and investors think about the near term market reaction, especially for public company buyers that care about EPS and valuation multiples. But interviewers ask this question to see whether you understand that EPS impact is not the same as value creation. A transaction can increase EPS without making the buyer economically better off, and it can reduce EPS while still creating long term shareholder value if the combined company is worth more than the pieces. The real judgment in an acquisition comes from evaluating the underlying economics, not just the accounting effect on earnings per share.