Accretion/Dilution Analysis

M&A Model: Accretion/Dilution Analysis

An important part of investment banking is understanding mergers and acquisitions (M&A). Within M&A, One of the core models investment banking analysts and associates have to build when analyzing an acquisition is the accretion/dilution model. The underlying purpose of such an analysis is to assess the impact of an acquisition on the acquirer’s expected future earnings per share (EPS).

M&A Model – Excel Template

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Part 1: Accretion/Dilution Analysis

Part 2: Accretion/Dilution Analysis

M&A Model Conclusion

This is a brief introduction to the concepts and adjustments underlying accretion/dilution analysis and modeling. These are, of course, just a few of the many issues that come into play when building an accretion/dilution analysis. Other adjustments that we did not include:

1. Advanced Purchase Price Allocation concepts including deferred taxes and the treatment of in-process research & development
2. Modeling asset sales, 338(h)(10) elections, and stock sales
3. Modeling an Advanced Sources & Uses of Funds schedule
4. Target debt considerations
5. Calendarization and stub year challenges in Excel

Those concepts, along with many others required to build a full-scale M&A accretion/dilution model, are covered in Wall Street Prep's Premium Package.