Dilutive Acquisition


Dilutive Acquisition
A takeover transaction that will decrease the acquirer's earnings per share (EPS) if additional shares are issued to pay for the acquisition. Dilutive acquisitions decrease shareholder value and should thus be avoided, unless the strategic value of the acquisition is expected to cause a sufficient increase in EPS in later years. An acquisition is only a good deal if the acquirer can derive more value from the acquisition than it pays out.

The easiest method of determining whether an acquisition deal is accretive or dilutive is to compare the price to earnings (P/E) ratios of the firms involved. If the target firm's P/E ratio is higher than the acquirer's P/E, then the transaction is dilutive.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Simon Property Group — Simon Property Group, Inc. Type Public (NYSE: SPG) Industry Real estate investment trusts …   Wikipedia

  • Accretion (finance) — In finance, accretion is the change in the price of a bond bought at a discount to the par value of the bond [ [http://financial dictionary.thefreedictionary.com/accretion Accretion definition on the financial dictionary] ] .Accretion, in a… …   Wikipedia

  • Cram down — A cram down or cramdown is the involuntary imposition by a court of a reorganization plan over the objection of some classes of creditors.[1] Contents 1 Home mortgage loans 2 Informal use 3 References …   Wikipedia

  • Capitalization Change — A modification in the issued and outstanding securities of a company. Capitalization changes occur either through the issuance of additional shares or the repurchase or cancellation of existing shares. This can have a dilutive or accretive effect …   Investment dictionary