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Accretive

Accretive

Accretive refers to a situation where an action, such as an acquisition or investment, increases the value of a company's earnings per share (EPS). When a transaction is accretive, it means that the combined profits of the two companies or the return on the investment will result in higher EPS for the acquiring company, benefiting shareholders. This is often a key goal in mergers and acquisitions, as it indicates that the deal will immediately add value to the company’s financial performance.

Example

If Company A buys Company B, and the combined company’s EPS increases after the acquisition, the deal is considered accretive.

Key points

• Increases the acquiring company’s earnings per share (EPS).

• Viewed favorably by investors and shareholders.

• Common goal in mergers and acquisitions.

Quick Answers to Curious Questions

What makes a transaction accretive?

A transaction is accretive when it leads to an increase in the acquiring company’s EPS, adding immediate value.

Why is an accretive deal beneficial to shareholders?

It increases the overall earnings per share, which can lead to a higher stock price and greater returns for shareholders.

Can all acquisitions be accretive?

Not all acquisitions are accretive; some may be dilutive, meaning they decrease EPS, at least in the short term.

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