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 & Acquisitions module.
This interactive learning module helps you understand Accretion through hands-on practice and real-world examples.