Pro forma EPS: accretion and dilution
Standalone to pro forma, per share.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: pro forma eps: accretion and dilution.Updated 30 September 2026
What it does
The heart of a merger model. Combined net income, plus after-tax synergies, less after-tax new interest, interest forgone and amortisation, is pro forma net income. The acquirer’s shares plus the shares issued are pro forma shares. One divided by the other, against the acquirer’s standalone EPS, is accretion or dilution.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Pro Forma EPS, rows 6–8: Acquirer net income, Target net income, Combined net income before adjustments
- Pro Forma EPS, rows 21–28: Pro forma net income, Acquirer shares, New shares issued, Pro forma shares…
- Pro Forma EPS, rows 31–32: Pre-tax run-rate synergies for zero accretion, Cushion: assumed run-rate less breakeven
What a reviewer looks for
- Comparing pro forma EPS with the target’s EPS rather than the acquirer’s.
- Using the acquirer’s shares before the issue in the pro forma count.
- An accretion percentage with the sign the wrong way round.
Learn it, then build it
Understand · Primer
Accretion / Dilution
Build · Lab · ~8 min
Accretion / Dilution Animator
Call a deal accretive or dilutive from P/E, premium and financing mix before you open a model.
Read · Guide · 12 min
How to Build a Merger Model: Purchase Accounting, Financing and Accretion
Read · Guide · 8 min
M&A Interview Questions: Accretion/Dilution and Beyond
Vocabulary: Merger Model.