What effect does the size of the target's net income relative to the acquirer's have on the transaction?

A larger target net income relative to the acquirer's typically suggests that the target contributes positively to the combined entity’s overall earnings. When a target has a significantly higher net income than the acquirer, it can potentially enhance the acquirer's earnings per share (EPS) post-acquisition, leading to an accretive deal. An accretive deal means that the acquisition increases the combined company's earnings relative to the acquirer's pre-acquisition earnings.

Conversely, if the target’s net income is smaller, it could lead to dilution, where the post-acquisition EPS decreases compared to the acquirer’s original EPS. Therefore, the size of the target's net income relative to the acquirer's is crucial, as it influences whether the deal will be accretive or dilutive. In the context of this question, a smaller target net income decreasing the likelihood of a successful accretive deal accurately reflects the dynamic of mergers and acquisitions where the relative earnings power of the companies involved is significant.