An accretive acquisition increases the earnings per share (EPS) of the acquiring company. A company can use an accretive acquisition to encourage an increase in its share price. The goal of an accretive acquisition is to increase the synergies of the two companies, producing a combined value that is greater than the sum of the separate parts.
How does an accretive acquisition affect a company's EPS?
An accretive acquisition increases the acquiring company's earnings per share (EPS). Accretive acquisitions tend to be favorable for the company's market price because the price paid by the acquiring firm is lower than the boost that the new acquisition is expected to provide to the acquiring company's EPS.
Are dilutive and accretive acquisitions worth it?
Dilutive and accretive acquisitions are a useful but imprecise tool for quickly assessing whether a deal will add or take from a company’s share price. It has little or no long-term value however, perhaps only hinting at a company’s wider acquisition strategy.
What does accretive mean?
To be accretive is to increase earnings per share. How Does Accretive Work? This term is most often used in the context of acquisitions. Let's assume Company XYZ has EPS of 25 cents this year. Next year, it acquires Company ABC.
