I want to leverage investment banking case studies I have completed on my resume. I know that for M&A valuations such as DCF can increase the sales price in a deal by a percentage, however, what is the purpose of accretion/dilution models. I know that they are useful for analyzing the transaction but can it be used as a reason to increase an offer? Do sell side M&A pitch books contain accretion/dilution models? - Do investment bankers make accretion/dilution models for every prospective buyer?
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Roughly speaking, a company's stock trades at a multiple of the company's earnings. Multiples can move for a variety of reasons, but for the sake of simplicity, assume they stay the same. If the company makes a long-term dilutive acquisition, that could mean a lower stock price. An immediately or near-term accretive deal would mean a higher stock price.
And if you're on the sellside yes you'd probably run the accretion/dilution for all the buyers to have a sense for what their ability to pay is, but it would be strange and unusual to share this with them. The math isn't that complicated and there is a 100% chance they're modeling it themselves.
The reason for that is that a company can more easily justify an acquisition if the transaction is accretive to its share holders as they will see their EPS increase, hence the potential money attributable to investors increases.
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