How do I calculate the accretion?
When evaluating the potential impact of a merger or acquisition, it is important to calculate Accretion to determine if the move is accretive or dilutive. Accretion can be calculated by subtracting the acquirer's earnings per share (EPS) before the acquisition from the acquirer's EPS after the acquisition, and then dividing this number by the acquirer's EPS before the acquisition. This gives a percentage of the EPS change due to the acquisition. To calculate the Accretion, use the following formula:
Accretion = (EPSafter - EPSbefore) ÷ EPSbefore. Sourcetable can be used to quickly and easily calculate Accretion.
What is Accretion?
Accretion is the growth of assets and earnings due to business expansion, a company's internal growth, or a merger or acquisition. It is also the accumulation of additional income an investor expects to receive after purchasing a bond at a discount and holding it until the bond matures.