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Accretion / Dilution Calculator

Model the EPS accretion or dilution of an M&A deal under cash, stock, and mixed consideration. Includes synergies and PPA adjustments.

Acquirer

Target

Deal

Adjustments

EPS impact

+1.7%

Accretive

Standalone EPS

$5.00

Pro forma EPS

$5.09

$8,571,428.57 change

Pro forma build-up

Cash consideration$375,000,000
Stock consideration$375,000,000 (5,000,000 new shares)
Debt consideration$0
+ New debt interest expense$0
+ Foregone interest income on cash$15,000,000
Pro forma net income$534,000,000
Pro forma diluted shares105,000,000
100% private

Your numbers never leave your browser. Tentt has no backend, no database, and no record of anything you type into this calculator — the math runs entirely on your device. Output is for illustrative modelling only and does not constitute investment, tax, legal, or accounting advice; verify any number you intend to act on.

What is accretion / dilution analysis?

Accretion / dilution is the single most-watched metric on every public-company M&A announcement. The question it answers is brutally simple: in the first full year after this deal closes, will the acquirer's earnings per share go up or down? If pro-forma EPS is higher than standalone EPS, the deal is "accretive". If lower, it is "dilutive". The financial press will use exactly those two words in their day-one coverage, the acquirer's CFO will lead the announcement call with the number, and the acquirer's stock price will move within about thirty seconds of the number being read.

No free interactive tool for this calculation existed on the web before this calculator. Every search result is an educational article from Wall Street Prep, Breaking Into Wall Street, Macabacus, or Street of Walls — and a long tail of paid Excel templates. The educational sites do not build interactive tools because they monetise their Excel templates and a free web tool would undermine the funnel. This page is the first comprehensive free accretion / dilution calculator on the entire internet.

The accretion / dilution formula

The mechanics are straightforward but every line is fiddly. The pro-forma earnings number is the sum of the acquirer's standalone earnings, the target's standalone earnings, and a set of deal-related adjustments — and the pro-forma share count includes any new shares issued as stock consideration.

Pro forma net income

PF NI = Acquirer NI + Target NI + (Synergies − PPA D&A − New Debt Interest − Foregone Interest) × (1 − Tax)

Pro forma EPS

PF EPS = PF NI / (Acquirer Shares + New Shares Issued)

Accretion / dilution

Accretion% = (PF EPS − Standalone EPS) / Standalone EPS

Worked example

Worked example

A public software company with $500M of net income and 100M shares outstanding (standalone EPS = $5.00) acquires a smaller software firm with $40M of net income for $750M, financed half in stock at the acquirer's $75 share price and half in cash.

Stock consideration: $375M / $75 = 5.0M new shares. Pro forma share count: 105.0M. Foregone interest on the $375M cash piece at a 4% reinvestment rate: $15M pretax, ~$11.25M post-tax.

Annual run-rate synergies of $15M and PPA-driven incremental D&A of $8M net to ~$5.25M post-tax of positive contribution.

Pro forma net income ≈ $500M + $40M + $5.25M − $11.25M ≈ $534M. Pro forma EPS = $534M / 105M ≈ $5.09 — accretive by about 1.7%.

When accretion is misleading

Year-one accretion / dilution is an accounting metric, not a value-creation metric. It can be gamed in three ways. First, by financing the deal with low-cost short-term debt that the acquirer plans to refinance with equity later — the year-one accretion looks great, but the eventual equity raise dilutes EPS in year two or three. Second, by pencilling in optimistic cost synergies that never materialise — McKinsey's longitudinal data on M&A integrations shows that most acquirers achieve only 60% to 70% of their stated cost synergy targets, and the gap is concentrated in the first 18 months. Third, by acquiring a target whose earnings are themselves of low quality — a business with declining organic growth dressed up by one-time items can look accretive at close and disastrously dilutive a year later.

The disciplined diligence sequence is to run accretion / dilution alongside three other analyses on the same target. First, an EBITDA bridge to verify the target's normalised earnings power. Second, a DCF valuation to test whether the offer price clears intrinsic value. Third, an LBO returns analysis to see what a financial sponsor would pay for the same asset — the LBO ceiling tells the strategic buyer whether they are leaving meaningful value on the table or overpaying relative to the next-best buyer.

Frequently asked questions

What is accretion / dilution analysis?
Accretion / dilution analysis answers a single question on every public M&A deal: does this transaction raise or lower the acquirer's pro-forma earnings per share in year one? An accretive deal raises EPS; a dilutive deal lowers it. Public-company management teams care intensely about the answer because EPS is the single most important metric public investors track, and announcing a dilutive acquisition almost always sends the acquirer's stock price down on day one.
How is accretion / dilution calculated?
The pro-forma EPS is the combined net income of the acquirer plus the target plus or minus the financing-cost effect of the deal, divided by the new pro-forma share count. If the answer is higher than the acquirer's standalone EPS, the deal is accretive. If lower, it is dilutive. The components are: (1) target's standalone net income added to the acquirer, (2) new shares issued for stock consideration, (3) incremental interest expense on new debt consideration, (4) foregone interest income on cash consideration, (5) incremental D&A from the purchase price allocation, and (6) annual run-rate synergies.
What makes a deal accretive?
Stock-financed deals are accretive when the target's earnings yield (net income / purchase price) is greater than the acquirer's earnings yield (1 / forward P/E). Cash-financed deals are accretive when the target's earnings yield is greater than the after-tax foregone interest income rate. Debt-financed deals are accretive when the target's earnings yield is greater than the after-tax cost of new debt. Synergies make any deal more accretive; PPA write-up D&A makes any deal less accretive in the early years.
Should I always pursue accretive deals?
No. Accretion / dilution is a year-one accounting metric, not a value-creation metric. A deal can be accretive in year one but value-destructive over the long run if the acquirer overpaid, and a deal can be dilutive in year one but enormously value-accretive over the long run if it gives the acquirer access to high-growth markets, key technology, or critical talent. Strategic buyers should always run a DCF on the target alongside the accretion / dilution analysis, and reject deals that are accretive but produce a negative NPV under realistic synergy and integration assumptions.
What is purchase price allocation D&A?
Under GAAP and IFRS, when one company acquires another, the purchase price gets allocated across the target's identifiable assets. Anything paid above the fair value of those assets becomes goodwill (which is no longer amortised). But identifiable intangibles like customer relationships, technology, brand names, and non-compete agreements get written up to fair value and then amortised over their useful lives. That incremental amortisation reduces pro-forma net income in years one through five typically, then phases out. PPA D&A is the largest single source of dilution in most strategic-acquirer deals.
What synergies should I assume?
Cost synergies — eliminating duplicate functions, consolidating facilities, renegotiating supplier contracts — are typically assumed at 2% to 5% of combined revenue, with realisation over 18 to 36 months. Revenue synergies are much more contested and most disciplined acquirers assume zero or near-zero in the base case. Diligence consultants typically apply a 30% to 50% haircut to management's synergy estimates because most deals fail to achieve their stated cost synergies in the timeframe promised.

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