🏦LTB
Series 79: M&A, Tender Offers & Restructuring
Series 79 practice questioneasyAccretion and Dilution Analysis

Why can a stock-for-stock acquisition be dilutive even when the target is growing quickly?

  1. AStock consideration removes all purchase accounting effects
  2. BSynergies are prohibited in stock deals
  3. CA stock deal cannot use fairness opinions
  4. DThe buyer may issue more shares than the target’s earnings contribution justifies on a per-share basis✓ Correct answer
Explanation

Why DThe buyer may issue more shares than the target’s earnings contribution justifies on a per-share basis

The buyer may issue more shares than the target’s earnings contribution justifies on a per-share basis Accretion and dilution depend on the relative earnings yield of what is bought versus what is issued. If the buyer issues expensive stock for a lower earnings yield target, the deal can be dilutive absent synergies or other offsets.

Turn it into reps

Reading one answer is not the same as being ready

Lucky the Banker is a free practice app with 477+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.

Related M&A, Tender Offers & Restructuring questions