Wall Street Prep

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.

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Imran Khan
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.

Michael Nichols
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?

June 24, 2018 3:01 pm

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

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 »

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?

Jethro J.
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!

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.

Luis A. Rodriguez
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 »

May 8, 2016 9:07 am

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The Wall Street Prep Quicklesson Series

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