Question of the day
2026-07-03
M&A
All-stock deal, no synergies: acquirer EPS 4.00 on 100 shares (NI 400), target NI 100 acquired for 1,500 of acquirer stock at price 40. Compute pro forma EPS and accretion/dilution.
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
New shares = 1,500 / 40 = 37.5. Pro forma shares = 100 + 37.5 = 137.5. Pro forma NI = 400 + 100 = 500. Pro forma EPS = 500 / 137.5 = 3.636. Accretion/dilution = 3.636 / 4.00 - 1 = -9.1%, so the deal is dilutive by ~9%. Sanity check with multiples: acquirer P/E = 40/4 = 10x; price paid for target = 1,500/100 = 15x. Acquirer (10x) < target (15x), so dilutive - consistent.
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