Course · Act I: The Buyout · Chapter 4
Accretion dilution analysis
Why a strategic buyer checks its EPS first: paying in stock or in cash, pro forma EPS, the P/E rule for all-stock deals, and why accretive isn’t the same as a good deal.
Key terms
- Accretive
- A deal that raises the buyer’s earnings per share.
- Dilutive
- A deal that lowers the buyer’s earnings per share, usually because it issues many new shares or borrows expensively.
- Pro forma EPS
- Earnings per share worked out as if the deal had already happened: combined earnings over the new share count.
- Strategic vs. financial buyer
- A strategic buyer is a company in the business, buying to keep. A financial buyer is a fund, buying to sell later.
“Accretive or Dilutive” is part of the full course: 7 puzzles on accretion dilution analysis. Biscuit Barrel is fictional; the frauds in the notes are real, settled cases. Try this act’s free chapter, “What Does It Cost?”, first.
“Accretive or Dilutive” is in Act I: The Buyout. 7 puzzles, unlimited retries.
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