Question

What is the rule of thumb for assessing whether an M&A deal will be accretive or dilutive?

a) If the deal increases EPS, it's accretive
b) If the deal decreases EPS, it's dilutive
c) Accretion/dilution is not a consideration in M&A
d) It depends solely on the deal size

Answer 1

The rule of thumb for assessing whether an M&A deal will be accretive or dilutive is based on its impact on EPS (Earnings per Share). If the deal increases EPS, it's accretive; if it decreases EPS, it's dilutive.

Step-by-step explanation:

In M&A deals, the rule of thumb for assessing whether a deal will be accretive or dilutive is by looking at its impact on EPS (Earnings per Share). If the deal increases EPS, it is considered accretive because it enhances the overall profitability of the merged company. On the other hand, if the deal decreases EPS, it is dilutive as it reduces the profitability of the merged company.

Accretion/dilution is an important consideration in M&A transactions as it directly affects the value and financial performance of the merged entity.

The rule of thumb mentioned in option a) is the commonly used approach to assess accretion or dilution in M&A deals.