Pre-deal situation:
The deal:
Post-deal situation:
|
Accretion/dilution analysis is a type of M&A financial modelling performed in the pre-deal phase to evaluate the effect of the transaction on shareholder value and to check whether EPS for buying shareholders will increase or decrease post-deal.[2] Generally, shareholders do not prefer dilutive transactions; however, if the deal may generate enough value to become accretive in a reasonable time, a proposed combination is justified.
Aside is a simplified example. A real-life accretion/dilution analysis may be much more complex if the deal is structured as cash-and-stock-for-stock, if preferred shares and dilutive instruments are involved, if debt and transaction fees are substantial, and so on. Generally, if the buying company has a higher P/E multiple than that of the target, the deal is likely to be accretive. The reverse is true for a dilutive transaction.
YouTube Encyclopedic
-
1/3Views:7 8961 297623
-
Expense Synergies in Merger Models
-
Full Scale Merger Model
-
Raising Debt and Equity
Transcription
See also
References
External links
- THE IMPACT OF EPS ACCRETION AND DILUTION ON STOCK PRICES
- Valuation of a P&C Company
- Example of A/D Analysis[permanent dead link]
