How is the accretion or dilution of an all-stock deal determined?

The determination of accretion or dilution in an all-stock deal primarily involves comparing the pro forma earnings per share (EPS) of the combined entity with the standalone EPS of the acquirer. This analysis reveals whether the transaction is beneficial (accretive) or harmful (dilutive) to the acquirer's shareholders.

If the pro forma EPS of the combined company is greater than the standalone EPS of the acquirer, the deal is considered accretive, meaning that the acquisition increases the earnings available to each share of the acquirer's stock. Conversely, if the pro forma EPS is lower, the deal is dilutive, indicating a decrease in earnings per share for the acquirer’s shareholders.

This comparison is crucial because it directly reflects how the deal will affect shareholders' value. Understanding the interplay between the acquiring company's existing earnings and the newly combined entity's projected earnings forms the foundation for evaluating the financial impact of the transaction.

Other options focus on factors like market conditions, historical performance, or regulatory impacts, which, while relevant to the overall assessment of an acquisition, do not directly influence the determination of whether a stock deal is accretive or dilutive.