Wall Street Prep
 Wall Street Prep Quicklessons

Accretion Dilution Modeling

Welcome back to the Wall Street Prep Quick Lesson Series!

An important part of investment banking is understanding mergers and acquisitions (M&A). Within M&A, One of the core models investment banking analysts and associates have to build when analyzing an acquisition is the accretion/dilution model. The underlying purpose of such an analysis is to assess the impact of an acquisition on the acquirer’s expected future earnings per share (EPS).

Ready to Model? Before diving in to the videos below, be sure to download this lesson’s Excel model template: Accretion dilution Excel model template.

M&A Modeling, Part 1

M&A Modeling, Part 2


This is a brief introduction to the concepts and adjustments underlying accretion/dilution analysis and modeling. These are, of course, just a few of the many issues that come into play when building an accretion/dilution analysis. Other adjustments that we did not include include:

  1. Advanced Purchase Price Allocation concepts including deferred taxes and the treatment of in-process research & development
  2. Modeling asset sales, 338(h)(10) elections, and stock sales
  3. Modeling an Advanced Sources & Uses of Funds schedule
  4. Target debt considerations
  5. Calendarization and stub year challenges in Excel

Extra fun

Click here to see how accretion/dilution is integrated into M&A pitchbooks prepared by Goldman Sachs and Lazard.

Notify of
most voted
newest oldest
Inline Feedbacks
View all comments
Imran Khan
September 20, 2018 3:07 am

Thanks a lot. Extremely helpful in understanding how a basic M&A model is prepared. Would have been great if you had also explained how to create the what-if analysis (sensitivity analysis) table.

Haseeb Chowdhry
October 9, 2018 12:19 pm
Reply to  Imran Khan


Great question – we cover sensitivity tables in many courses, including our Excel Crash Course, the Financial Statement Modeling Course, and the Discounted Cash Flow course. Thanks!

– Haseeb

Mike Tucker
October 18, 2023 9:55 am

Awesome thank you!

Sanjaykumar Patil
June 1, 2023 9:00 am

The simplicity of the modeling template and the clear explanation method used in the video greatly enhanced my understanding. It was an invaluable resource that expanded my knowledge in this area. Thank you for your generosity in offering such informative and helpful content.

Brad Barlow
April 15, 2024 9:11 pm

Thanks, Sanjaykumar, and you are welcome!

Rajkumar R
April 25, 2023 8:04 am

Really nice videos (quick lessons) that have given me an insight into the world of investment banking analysis, which seems an interesting domain. Thanks to you for collating all this stuff in a very simple to understand format and language. Nice work. Will look forward to many such intuitive videos… Read more »

Brad Barlow
April 26, 2023 11:24 am
Reply to  Rajkumar R

You’re welcome, Rajkumar, and thanks for the positive feedback!


July 16, 2022 11:15 am

May I know why the item ” Less: Financing fees amortization” is only account for 1 year only? many thanks!

Brad Barlow
July 17, 2022 10:27 pm
Reply to  Anna

Hi, Anna,

Financing fee amortization would reduce net income for the life of the debt issued. But here we are only showing one year of pro forma results.


May 25, 2022 4:31 pm

great videos. Thanks! one question: would the acquirer determine the feasibility of an acquisition by analyzing only one year of profitability and adjustments or it should be at least a 3 years of projections? and is the EPS only would be the right KPI or IRR and NPV would be… Read more »

Brad Barlow
May 27, 2022 10:51 am
Reply to  Ayman

Hi, Ayman, Great questions! Multiple years are definitely needed, because a deal that is dilutive in the short run might become accretive in the long run and thus attractive. And yes, there is no substitute for IRR and NPV, which are much more comprehensive ways of evaluating the deal. But… Read more »

January 10, 2022 3:24 am

Great illustration and tutorial well presented. A new one for me and a string addition to my bow. Looking to do more courses especially corporate finance related from Wall Street Prep in the near future.

Jeff Schmidt
January 10, 2022 11:00 am
Reply to  Dave




Michael Nichols
March 20, 2021 6:51 am

This is a great model — very informative. Does WSP have any similar modeling for acquisition of (or by) a privately held company wherein the target and/or the acquirer have equity ownership positions but not necessarily share distributions, therefore no EPS considerations?

Jeff Schmidt
March 20, 2021 10:43 am


Unfortunately we don’t really have anything like that.


June 24, 2018 3:01 pm

Hi, thanks for sharing these lessons. The videos, however, are coming up blank with sound only. Thanks

Haseeb Chowdhry
July 6, 2018 12:03 am
Reply to  Yoni


Have you undergone any troubleshooting? Is this problem still persisting? Please let us know – thanks!

July 22, 2017 3:23 pm

Just curious- How do you create the sensitivity analysis at the bottom of the excel spreadsheet to update with offer and % assumptions.

Haseeb Chowdhry
July 23, 2017 10:02 am
Reply to  Elliot


We build the sensitivities using the same tools discussed in the Excel Crash Course and the Finanical Statement modeling courses – it involves using the data table command (Alt A W T). Hope this helps!

July 6, 2017 10:07 pm

Haseeb, Shannon, This M&A tutorial was very educational and appreciate the value! A less pertinent question on modeling but more on accounting treatment – what is the incentive of writing-up an asset if the final result towards Net Income is negative, and therefore lower EPS? Is it purely to increase… Read more »

Haseeb Chowdhry
July 7, 2017 2:41 pm
Reply to  Vishal


Writing up assets on the balance sheet provides additional tax benefits for the acquirer. More tax shields means less taxes, and it’s even better when the deal is an asset sale b/c that leads to real cash tax benefits. Hope this helps!

March 30, 2017 5:25 pm

Excellent overview! Helps to start with an overview and work into the details.

January 26, 2017 11:53 am

Why did you use only $5m as the asset write up value? Can you show how you obtained this figure when there was a 60% bid premium?

Haseeb Chowdhry
February 15, 2017 1:25 am
Reply to  John

John, The offer premium is a separate question from an appraisal of fixed and intangible assets that are confirmed at the later stage of the deal. The premium is the buyer’s willingness to pay for the asset based on transaction comps and for synergies, and in a fundamental belief that… Read more »

Jethro J.
August 18, 2016 11:04 am

Thank you for the Accretion/Dilution model! This was very helpful for case studies and for other future references!

Shannan Wilson
August 18, 2016 3:15 pm
Reply to  Jethro J.

You’re welcome, Jethro!

July 22, 2016 12:01 pm

Very interesting topic and useful insights.

However, I didn’t quite understand why only the financing fee amortisation was deducted in the pro-forma net income. I would really appreciate your feedback.

Thanks again.

Shannan Wilson
August 12, 2016 11:12 pm
Reply to  Titi

Hi Titi, When a company borrows debt to finance an acquisition, the fees related to this borrowing are treated differently from advisory, legal, and accounting fees. Underwriting fees are capitalized and amortized over the life of the debt issuance. This creates an incremental amortization expense which reduces pro forma net… Read more »

Luis A. Rodriguez
May 21, 2016 12:07 pm

Wall Street Prep Team, With my newly found powers acquired with the lesson M&A Modeling Part 1, was able to call the spade in the Bayer – Monsanto announced deal. Acquiring the information from various sources (Bloomberg, Reuters, Google and Yahoo Finance) have the chance to modeled the deal, using… Read more »

Shannan Wilson
May 23, 2016 11:23 pm

Glad you enjoyed the lesson and it’s proving useful!

May 8, 2016 9:07 am

Extra fun link is not working. showing error 404

Shannan Wilson
May 17, 2016 3:41 pm
Reply to  Manchit

Hi Manchit,
The link seems to be working fine, but in case you are still having trouble, here it is directly (