Accretion is not value

Whether a deal adds to earnings per share depends on how it was paid for. Whether it was worth doing is a separate question.

• Deals and M&A
• Valuation

2 ideas that carry it

• ArgumentDeals and M&AVideo located

  Accretion is arithmetic; whether a deal was worth doing is a different question

  Answer accretion with arithmetic and value with evidence, and never let the first stand in for the second.

  Any M&A interview, any accretion-dilution question, and any board case where accretion is offered as the reason to proceed.

  From Session 25: Acquisition, a Value Destroyer? · Aswath Damodaran (NYU Stern)

• TechniqueDeals and M&AVideo located

  Synergies are worth something only once they are valued rather than asserted

  A synergy is a change in cash flow, growth or risk; value it as one, and only then compare it with the premium being paid.

  M&A interviews that ask how to value synergies, and any deal where the premium is justified by them.

  From Session 12: Acquisition Ornaments — Synergy, Control & Complexity · Aswath Damodaran (NYU Stern)