Accretion/dilution in an all-cash deal
Hi, since cost of cash is essentially zero, an all-cash deal is always accretive. Is this reasoning correct?
Trending Content - Investment Banking Forum
| +261 | Why UBS Is the Worst Place to Start Your IB Career | 40 | 1d |
| +218 | UBS 2nd Year Analyst Q&A (2026) | 41 | 9h |
| +96 | What's your craziest "hardo" story? | 16 | 18h |
| +62 | Indiana University Fraternity Pipelines | 36 | 2d |
| +52 | Rogo AI | 22 | 12h |
| +49 | Elite Boutique interview questions | 17 | 1d |
| +49 | Wolf of Wall Street vs. Reality: Anyone else feel scammed by the movies? | 18 | 11h |
| +48 | Suspended for a Year | 21 | 3h |
| +30 | Rate my non-target resume | 15 | 12h |
| +25 | UBS IB 26Q2 a Disaster! Advisory Revenue Down 23%, Capital MarketsDown 5% | 6 | 14m |
Career Resources
From my understanding, an all-cash deal doesn't necessarily mean the acquiring company is financing purely from cash reserves. They can finance the deal from debt and equity too. So an all-cash deal isn't always accretive.
This is correct, but in most interviews they will specify if it's cash on balance sheet or debt. In the case of cash on balance sheet, as the poster mentioned it's nearly always accretive. The better answer is that the deal is accretive if the added earnings exceed the forgone interest generated by the cash on the balance sheet, which is again, nearly always the case .
I agree.
Best way to think of it IMO, is to flip P/E round and think of it as earnings yield. Cost of cash is the foregone interest rate, yield is 1(/P/E).
If it's debt then tax after-tax cost of debt and compare that to the yield.
Aliquam est dicta sequi soluta qui ducimus. Harum enim ea voluptatum. Est eaque quia doloribus aut porro quisquam. Libero est sit reprehenderit et.
Aut et sed quibusdam sunt quod consequuntur tenetur. Est doloremque expedita delectus possimus suscipit eius nam.
Voluptatibus accusamus animi aut. Commodi rerum quia quis. Sint harum perferendis voluptatum dicta aspernatur sit sequi. Ullam adipisci et architecto error ut officia. Deleniti dolore accusamus nostrum tempora. Velit reiciendis modi sit sint unde.
Eos eveniet perferendis velit fuga quia quisquam deleniti. Sit temporibus numquam et voluptatum minus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...