Accretion / Dilution in Excel
Accretion/Dilution Model
Pull Standalone EPS
Acquirer net income / shares outstanding.
Build Combined Net Income
Add target NI, subtract incremental interest, add synergies (after-tax).
Calculate Pro Forma Shares
Original shares + new shares issued (if stock deal).
Compute % Accretion
(Pro forma EPS - standalone EPS) / standalone EPS — positive = accretive.
Noble Desktop's Financial Analyst Training Program covers financial modeling, valuation, accounting, and Excel for finance.
Explore the calculations behind financial processes through our instructional video and accompanying visual aids.
C10=C7*(1+C8)*C9
B17=B16*B9
B19=B17+C17
B20=C14*(1-C13)
B21=SUM(B19:B20)
B23=B9
B24=C10*C11/B7
B25=SUM(B23:B24)
B27=B21/B25
B28=B27/B15-1
1Full Video Transcript
2Understanding Accretion/Dilution Analysis
In this video we're going to talk about the accretion/dilution analysis that you would perform for M&A transactions. An accretion/dilution analysis is a simple test used to evaluate the merit of a proposed merger or acquisition deal. The accretion/dilution analysis determines if the post-transaction earnings per share is increased or decreased.
The managers in a prospective M&A deal need to consider many factors such as the negotiation process, the global impact, and the compatibility of the companies. The process of an accretion/dilution analysis begins with estimating pro forma net income to eventually arrive at pro forma earnings per share. An increase in pro forma earnings per share is regarded as an accretion, while a decrease is regarded as a dilution.