Accretion refers to an increase in earnings per share (EPS) after an acquisition. It is a key metric in merger analysis and tells you whether the deal will benefit the acquirer's shareholders financially on a per-share basis.Accretion / Dilution % = (Pro Forma EPS − Acquirer Standalone EPS) / Acquirer Standalone EPS If the result is positive, the deal is considered accretive. What causes accretion? The target has a higher earnings yield than the acquirer’s cost of capital (especially cost of debt or equity financing).Synergies, such as cost reductions or revenue growth.The acquisition is financed with low-cost debt or cash, rather than expensive equity.
Learn Accretion with interactive examples and practice exercises in our Mergers and Acquisitions module.
This interactive learning module helps you understand Accretion through hands-on practice and real-world examples.