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

The idea

Whether a deal adds to earnings per share is a consequence of how it was paid for: cheap debt or a high-multiple stock buying lower-multiple earnings accretes almost regardless of merit. Whether the deal created value is a separate question, and Damodaran's lecture reviews the evidence on how acquirers answer it: on average, acquiring firms' shareholders lose and targets' gain, and the pattern has persisted for decades. The lecture then asks why firms keep doing it, and the answers are about incentives, overconfidence and the advisers who are paid when deals close. For a candidate, the lesson is to answer the accretion question and then, unprompted, the value one.

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

How to use it

Run the Accretion-Dilution lab and get the EPS answer. Then write one paragraph on value: what was paid against what the target was worth alone plus synergies, and who captured the difference. Trian's Gillette letter is that paragraph, ten years on.