An acquirer with a P/E of 12 buys a target at a P/E of 10 in an all-stock deal, no synergies. Accretive or dilutive?

How to answer

Accretive. In an all-stock deal with no synergies, just compare P/Es: acquirer P/E (12) > target P/E (10), so it is accretive. Intuition: you pay 10x for the target's earnings using stock that the market prices at 12x, so each dollar of acquired earnings costs you less than a dollar of your own earnings is worth. Concretely — acquirer NI 100, target NI 50 bought for 50×10 = 500 of stock at a 12x share price means ~41.7 new shares; pro forma EPS = 150 / 141.7 ≈ 1.059 vs. 1.00 standalone, about +5.9% accretion.

Key idea: All-stock, no synergies: just compare the two P/Es.