What analysis helps determine if a merger will create or destroy shareholder value?

Accretion/Dilution Analysis is crucial in determining the impact of a merger on shareholder value because it measures how the merger will affect the earnings per share (EPS) of the acquiring company post-transaction. This analysis assesses whether the combined company's EPS will increase (accretion) or decrease (dilution) as a result of the merger.

When a merger occurs, the acquiring company pays a certain price for the target, which can be either cash, stock, or a combination of both. By evaluating the projected EPS of the combined entity against the standalone EPS of the acquirer, investment bankers can ascertain whether the deal will enhance or diminish the value for shareholders. If the merger results in an increased EPS, it is generally seen as a positive sign that the deal has created shareholder value. Conversely, if EPS decreases, it suggests that the merger may be detrimental to shareholders, thus destroying value.

Other analyses, such as Cost-Benefit Analysis, Market Comparison Analysis, and Valuation Analysis, while important in their own right, do not specifically focus on the direct impact on EPS resulting from a merger. They may provide insights into the overall feasibility, comparative industry metrics, or valuation multiples but do not directly answer whether the merger will ultimately benefit or