SunWorks Inc (SUNWQ)

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Definition - What does Accretive Acquisition mean?

An accretive acquisition occurs when the value of the buyer increases as a result of acquiring a specific company. This value accretion occurs because the buyer gets to add the acquisition's proforma EBITDA/earnings to its own EBITDA/earnings, therefore yielding a higher consolidated proforma EBITDA/earnings. If the buyer is valued at a higher EV/EBITDA or price/earnings multiple than the acquired company, the total value "pops" due to the application of the buyer's multiple to the combined proforma EBITDA/earnings, essentially resulting in multiple arbitrage on the acquisition.