Dilutive Acquisition

Categories: Mergers and Acquisitions, Business and Management,

A business acquisition which decreases the acquiring entity's earnings per share (EPS). An enterprise may make a dilutive acquisition if it foresees long-term growth through increased sales or cost savings in the acquisition. Further, a dilutive acquisition may be justified by strategic advantages such as copyright and technologies. Generally, an acquisition is dilutive when the price earnings ratio of the acquiring firm is less than that of the target firm.