All else being equal, which of the following results in greater accretion? Increasing takeover premium and...
All else being equal, which of the following results in greater accretion?
Increasing takeover premium and increasing revenue enhancement
Decreasing takeover premium and increasing revenue enhancement
Increasing takeover premium and decreasing revenue enhancement
Decreasing takeover premium and decreasing revenue enhancement
Homework Answers
Decreasing takeover premium and increasing revenue enhancement can lead to greater accretion.
Accretion occurs when acquiring company's Earnings Per Share increases after the acquisition of the target company. In this type of transaction the price paid by acquirer is typically lower than any gains realized in Earning Per Share as a result of the transaction. As a result, decreasing takeover premium leads to greater accretion.
Accretion refers to the actual value created after particular transaction or action taken by company. The company can decrease costs, eliminate low margin clients, implement new marketing techniques, increase product prices, or expand to a new geographical location for increasing their revenues. These revenue enhancement measures can add value to the company by increasing the bottom line i.e earning per share of company and thus creating greater accretion.
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