What does accretive mean in finance?

In both finance and in general lexicon, the term "accretive" is the adjective form of the word "accretion", which refers to gradual or incremental growth. For example, an acquisition deal may be deemed accretive for the absorbing company, if that deal contributes to an increase in earnings per share .

What makes a deal accretive?

In mergers and acquisitions, a deal is accretive if it improves the company’s earnings per share (EPS) — Which is the company’s earnings divided by the number of outstanding shares. Through the acquisition, the former business improves (often by becoming more efficient), and the new company’s earnings increase.

Do accretive acquisitions add value to a company?

By definition, in corporate finance, accretive acquisitions of assets or businesses must ultimately add more value to a company, than the expenditures associated with the acquisition.