What is accretive acquisition?

When a company acquires (or 'buys') another company, the deal will, more often than not, impact the acquiring company's market price. If after the deal, the value of the acquiring company's earnings per share is higher than before the deal, it is known as an accretive acquisition. Where have you heard about accretive acquisition?

How does an accretive acquisition affect a company's EPS?

An accretive acquisition increases the acquiring company's earnings per share (EPS). Accretive acquisitions tend to be favorable for the company's market price because the price paid by the acquiring firm is lower than the boost that the new acquisition is expected to provide to the acquiring company's EPS.

Are dilutive and accretive acquisitions worth it?

Dilutive and accretive acquisitions are a useful but imprecise tool for quickly assessing whether a deal will add or take from a company’s share price. It has little or no long-term value however, perhaps only hinting at a company’s wider acquisition strategy.

Is company XYZ an accretive acquisition?

Company XYZ comes out 2 cents per share ahead, meaning the acquisition is accretive to earnings. Generally, an acquisition is accretive if the acquirer 's price/earnings ratio is higher than the target's price/earnings ratio. Theoretically, the target in this case is a relative bargain for the acquirer. Why Does an Accretive Acquisition Matter?