Accretion / Dilution
Will the deal add to earnings or dilute them? Plug in the two companies and the structure — cash versus stock, the offer price, the cost of debt, the synergies — and read off pro-forma EPS, the accretion or dilution, and the pre-tax synergies you'd need just to break even.
Inputs — $mm unless noted
Year-1 EPS accretion / (dilution)
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Sensitivity
Accretion / (dilution) across the cash-vs-stock mix (rows) and run-rate synergies (columns). The center cell is your inputs. Green is accretive, red dilutive.
How it works
The idea. Accretion/dilution is the first question on any deal. Combine the two income statements, pay for it with some mix of cash (raised as debt) and stock (newly issued shares), and check whether pro-forma EPS lands above or below the acquirer's standalone EPS. Accretive isn't the same as value-creating — but a dilutive deal needs a very good story.
The math. Offer value = target shares × offer price. Split it into a cash portion (funded with debt that costs after-tax interest) and a stock portion (funded by issuing acquirer shares at its price). Pro-forma net income = acquirer + target + after-tax synergies − after-tax interest on the new debt. Pro-forma shares = acquirer shares + new shares issued. Then pro-forma EPS ÷ standalone EPS − 1 is the accretion or dilution.
The shorthand. In an all-stock deal, the result flips on the multiples: accretive when the target's P/E is below the acquirer's, dilutive when it's above — you're trading paper for earnings. Cash-financed, the test is the target's earnings yield versus the after-tax cost of the debt. This tool runs the full version with the mix, the tax shield and the synergies, and solves for the break-even synergies — the run-rate number that takes EPS back to flat. Pair it with the LBO for the sponsor's view and the comps for the price.
First-year, static analysis: no purchase-accounting step-ups or intangible amortization, no balance-sheet cash used, no revenue dis-synergies, no share buyback offset. A screening tool, not a fairness opinion. Nothing here is investment advice. Built by Brandon Leon — independent research focused on cyclical industries.