Accretion / dilution.

In plain English

An acquisition is accretive when it increases the buyer's earnings per share and dilutive when it lowers them. The result depends on the price paid, how the deal is funded, and the target's own earnings. Paying with cash or cheap debt tends toward accretion; issuing many new shares tends toward dilution because the same profit is divided among more owners. Companies announce this figure early because it is easy to calculate and easy to headline. It is a short-term accounting outcome, not a measure of whether the deal made strategic sense.

01Why it matters

A deal can be labeled accretive on day one and still destroy value, because paying with cheap debt lifts earnings per share regardless of whether the business bought was any good.

02The math, step by step

A buyer earns $200 million with 100 million shares, so earnings per share is $2.00. It issues 20 million new shares to acquire a company earning $50 million. Combined profit is $250 million over 120 million shares, or $2.08 per share. The deal is accretive by 8 cents.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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