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Dilutive Acquisition

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Dilutive Acquisition
An acquisition that will decrease the acquiring company's EPS.

Notes:
These acquisitions will tend to cause a firm's market price to decline, as they are expected to decrease the company's future earnings. In essence, the price paid by the acquiring firm exceeds its addition to EPS.

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


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