EPS accretion and dilution

In the context of a merger or acquisition, a deal is described as accretive if it increases the acquiring company's earnings per share, and dilutive if it decreases it. This depends on how the deal is financed and on the relative valuations of the two companies involved, not just on whether the target business itself is a good one.

A deal can be strategically sound for the business but still be dilutive to EPS in the short term, for example if it is funded largely by issuing new shares. Investors and management both watch accretion and dilution closely because it directly affects a key per-share metric even before any of the deal's strategic benefits show up.