Merger Acquisition Accretion Dilution Calculator

Purpose and model boundary

This model builds a synthetic cash-and-stock purchase-consideration and financing bridge, applies recurring after-tax earnings adjustments, and compares pro forma diluted EPS with acquirer stand-alone diluted EPS. It is a static annualized consequence model. It does not produce a purchase-price allocation, filed pro forma financial statements, a valuation, a fairness opinion, or investment, accounting, tax, financing, or legal advice.

Inputs and units

All financial amounts use one consistent currency and the displayed millions scale. Per-share inputs use currency per share, and share counts use millions of diluted shares. The consideration route is all cash, all stock, or a user-entered mixed cash percentage. The cash-financing route is new debt, cash on hand, or a user-entered blend.

The acquirer inputs include share price, stand-alone net income, and diluted shares. Target inputs include diluted shares, offer price per share, stand-alone net income, debt, and cash. Financing inputs include debt-funded percentage, new-debt interest rate, foregone cash yield, and tax rate. Workbook-authored visibility rules show only the percentages and rates used by the active consideration and financing routes.

The adjustment grid has capacity for six recurring merger adjustments. Each row declares Yes or No, a label, whether the amount adds to or subtracts from earnings, whether it is pretax or after-tax, and a nonnegative annual amount. Populated rows must be contiguous. The active-row controls change only the declared Include? value and retain the fixed six-row submitted values.

Governing relationships

Offer equity value = target diluted shares × offer price per target share

The cash share of consideration is 100% for all cash, zero for all stock, or the entered mixed percentage. Stock consideration is the residual:

Cash consideration = offer equity value × cash percentage

Stock consideration = offer equity value - cash consideration

For a cash-funded transaction, the new-debt share is 100% for new debt, zero for cash on hand, or the entered blended percentage:

New debt funding = cash consideration × debt-funded percentage

Cash on hand used = cash consideration - new debt funding

Shares issued = stock consideration / acquirer share price

After-tax financing cost = (new debt funding × debt interest rate + cash used × foregone cash yield) × (1 - tax rate)

Each included adjustment receives a positive or negative sign from its earnings direction. A pretax row is multiplied by 1 - tax rate; an after-tax row is not tax-affected. The net adjustments output is the sum of those signed contributions.

Pro forma net income = acquirer net income + target net income + net after-tax adjustments - after-tax financing cost

Pro forma diluted shares = acquirer diluted shares + shares issued

Stand-alone EPS = acquirer net income / acquirer diluted shares

Pro forma EPS = pro forma net income / pro forma diluted shares

EPS accretion or dilution = pro forma EPS / stand-alone EPS - 1

The breakeven output is the nonnegative additional after-tax earnings needed for pro forma EPS to equal stand-alone EPS at the modeled share count.

Calculation sequence

1. Validate consideration and financing routes, positive purchase and stand-alone denominator inputs, tax assumptions, and the contiguous grid.
2. Calculate offer equity value and transaction enterprise value.
3. Divide equity consideration between cash and stock, then divide cash funding between debt and cash on hand.
4. Calculate shares issued, after-tax financing cost, and each included adjustment's signed after-tax contribution.
5. Build pro forma net income and diluted shares, then calculate stand-alone and pro forma EPS.
6. Calculate EPS change, accretion or dilution, the breakeven adjustment, the EPS comparison chart, and status.

Outputs and interpretation

The main results are offer equity value, pro forma net income, pro forma EPS, and EPS accretion or dilution. Supporting outputs disclose enterprise value, consideration and financing amounts, shares issued, financing cost, net adjustments, share count, stand-alone EPS, EPS change, breakeven adjustment, and the active route. The chart compares stand-alone and pro forma diluted EPS. Accretion is not evidence of value creation, and dilution is not evidence of value destruction.

Validation and status logic

The workbook evaluates status in this order:

Hidden financing inputs are ignored by inactive routes. An all-stock route uses no cash financing.

Assumptions and limitations

• Offer price times target diluted shares is a simplified equity purchase price.
• New-debt interest and foregone cash yield are simple annual rates on modeled funding amounts.
• Pretax financing costs and pretax adjustment rows use one uniform modeled tax rate.
• Shares issued are assumed outstanding for the modeled period without time weighting.
• Adjustment rows are user assertions, not management projections, audited adjustments, or purchase-accounting conclusions.
• The model omits options, restricted awards, collars, earnouts, transaction fees, refinancing mechanics, staged closing, purchase accounting, deferred taxes, goodwill, and detailed depreciation or amortization schedules.
• It does not create or certify SEC-compliant pro forma financial information.

Restrictions and non-computing states

Acquirer share price, target diluted shares, offer price, acquirer stand-alone net income, and acquirer diluted shares must be positive. Target stand-alone net income, debt, cash, and adjustment amounts cannot be negative. At least one adjustment row must be populated, populated rows must be contiguous, and every populated row must use listed direction and tax-basis values. A malformed bridge or non-finite EPS calculation prevents a supported result.

Errors and warnings

Input checking can reject an unknown option, a rate outside its allowed range, or an invalid grid shape before calculation. Workbook NOT VALID identifies an input or derived-range failure. Workbook CHECK preserves a computable dilutive case for review. A connection or calculation-service error is not dilution and must be handled separately.

The EPS denominator convention follows the Investor.gov definition of earnings per share. Scope and pro forma limitations are informed by the SEC guide to financial disclosures about acquired and disposed businesses and SEC Financial Reporting Manual Topic 3. No filed values, transaction analysis, source prose, or third-party work product is embedded.