Accretive Acquisition

An acquisition that will increase the acquiring company's EPS.

As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. In essence, the price paid by the acquiring firm is smaller than the addition to its EPS.

As a general rule, an accretive merger or acquisition occurs when the P/E ratio of the acquiring firm is greater than that of the target firm.