Accretion and Dilution
Show what the deal does to the acquirer’s earnings per share.
Seat
IB · PE
Level
Analyst / Associate
Runtime
~30 min
Output
Accretion / dilution page: Excel + slide
What this helps you accomplish
A pro forma earnings build for two forecast years, the synergies needed to break even, and a grid across the consideration mix and the synergy number. Cash is accretive when the yield on the earnings bought beats the after-tax cost of the cash. Stock is dilutive when the acquirer trades below the target’s multiple, and no amount of strategic language changes that arithmetic.
What you get
Not a description of an output. The file itself, in the conventions a banker, a PE associate or a hedge fund analyst already reads without being told.
{TICKER}_accretion-dilution.xlsx
Excel workbook
- 1
Transaction inputs
The offer, the consideration mix, the acquirer’s price and share count, the cost of cash and debt, the tax rate and the synergies
- 2
Pro forma EPS build ($mm unless stated)
Both companies’ net income for two forecast years, the financing effects, synergies, new shares issued and pro forma earnings per share against standalone
- 3
Breakeven synergies
The pre-tax synergy that takes the first year to zero, which is the number a board remembers
- 4
Sensitivity: accretion to stock mix and synergies
A grid across the consideration mix and the synergy figure, so the trade-off between the two is visible at once
- 5
PowerPoint
One slide: the two-year build, a KPI rail of the accretion and the breakeven, and the sensitivity table
Where the numbers come from
From the filings: the acquirer’s and the target’s net income, share counts and earnings per share, from each company’s own filings. Every filed figure resolves to its form, period, page, the printed value and a link into the filing on EDGAR. Not from filings: the financing mix, the growth applied to each forecast year, and synergies, which start at zero so the page shows the deal before anyone improves it. Assumptions are listed on the slide’s source line under "Not from filings", so an assumed input is never read as a filed one.
Run it yourself
python3 skills/deal-slides/build.py accretion-dilution --ticker BSX --acquirer JNJ --offer 60Delegate · Verify · Decide
The core L3VLUP principle: AI output is never automatically correct. Know what to hand off, what to check, and what only you can own.
Delegate
AI is good enough to do this.
- • Pulling both companies’ net income, share counts and earnings per share with a citation on each
- • The pro forma build, the financing effects and the new shares issued
- • The breakeven synergy solve and the sensitivity grid
- • Building the branded slide with the KPI rail and the grid
Verify
AI accelerates you here, but a professional checks the work.
- • That the two companies’ fiscal years are aligned, or that the misalignment is stated
- • That the forecast net income for each is on a consistent basis, reported or adjusted, for both
- • That the new share count uses the acquirer’s price rather than the offer
- • That the after-tax cost of cash uses a marginal rate
Decide
Judgment the human owns. This is the skill.
- • The consideration mix, and what the balance sheet can carry
- • The synergies, whether they are phased or run-rate, and whether one-time costs are excluded
- • Whether year-one dilution is acceptable for what the deal buys
- • What the page is being used to argue, and whether it actually supports that
Inputs required
- Company name or ticker for the target
- The acquirer’s ticker
- The offer per share
- The consideration mix and the cost of the cash or debt funding it
- Your own numbers where you would rather not use the default
The workflow
- 1
Resolve both companies
The acquirer and the target are read separately, so each net income and share count traces to its own filings.
- 2
Set the consideration mix
The cash and stock split, and the rate on the cash. That pair decides the answer more than anything else on the page.
- 3
Start with no synergies
The honest first version. If the deal is accretive before synergies, say so; if it needs them, the breakeven line is the number to quote.
- 4
Build and read year one against year two
A deal that is dilutive in year one and accretive in year two is a different conversation from one that never turns.
- 5
Check the sensitivity corners
All stock with no synergies is the worst corner of the grid. If that corner is survivable, the deal is robust.
Run this skill
Any listed company, anywhere. Ticker or name.
Quality checklist
The output isn’t done until every box ticks.
- verify reports zero errors: change the stock mix or a synergy figure and every earnings line and the grid move
- Units are stated: $mm on the build, $ on the per-share lines, mm on share counts, % on the accretion, and the subtitle states the consideration mix
- The implied premium line names the price it compares the offer with, and says whether that price is current or unaffected
- Accretion with no synergies and a high offer is checked against the acquirer’s own multiple before it is believed
- The notes say whether one-time costs are excluded and whether the synergies are phased or run-rate
Practise the fundamentals first
Free, no sign-up — in the Labs.