cquisition'
An accretive acquisition increases synergies between the acquired and the acquirer. A synergy occurs when the combination of two organizations produce a combined value that is greater than the sum of the separate parts. So, value in an accretive acquisition is generated because the buyer of a smaller company is able to add the acquired business's pro-forma EBITDA/earnings ratio to its own EBITDA/earnings ratio, where EBITDA is earnings before interest, taxes, depreciation and amortization. If the acquisition is done correctly, the purchasing company has a higher enterprise value (EV)/EBITDA multiple, and the addition of the acquired company increases the total value of the combined entity.
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