M&A Modeling Practice Exam 2026 - Free Mergers and Acquisitions Modeling Practice Questions and Study Guide

The structure of a deal significantly influences accretion/dilution outcomes primarily through its impact on the method of valuation for the target company. When a deal is structured, there are various ways to value the target, such as using comparable company analysis, precedent transactions, or discounted cash flow (DCF) analysis. These valuation methods can yield different estimates of the target's worth, which directly affects the price that the acquirer pays for the target.

The price paid in relation to the combined earnings post-acquisition of the acquirer and the target is crucial for determining whether the transaction will be accretive (increasing Earnings per Share, or EPS) or dilutive (decreasing EPS). A higher valuation of the target, for instance, might lead to a deal that is dilutive if the acquirer's EPS drops post-transaction relative to pre-transaction levels. On the other hand, an appropriately valued or undervalued target could lead to an accretive situation, where the acquirer's shareholders benefit from the merger.

Thus, the structure of the deal, which affects the valuation method and resultant pricing, plays a vital role in how the transaction will impact the acquirer's EPS, directly influencing accretion or dilution outcomes. This