What does a decrease in post-acquisition EPS compared to pre-acquisition EPS typically suggest?

A decrease in post-acquisition earnings per share (EPS) compared to pre-acquisition EPS typically suggests that the acquisition is dilutive. This means that the acquisition has negatively impacted the company's earnings relative to the number of shares outstanding, often resulting from the cost of the acquisition or poor performance of the acquired assets.

When an acquisition is dilutive, it indicates that the earnings generated by the new assets or operations are not sufficient to improve overall profitability in relation to the increase in shares that may result from financing the acquisition. This situation can raise concerns among investors and stakeholders regarding the effectiveness of the acquisition strategy and its potential to create long-term value.

In contrast, an accretive acquisition would result in an increase in EPS, which signals that the deal has enhanced the earning power of the company. An acquisition deemed highly successful would typically show improvements in financial metrics, including EPS. If an acquisition had no effect, you would expect the EPS to remain unchanged, which is not the case if there has been a decline post-acquisition. Therefore, the assessment of a decrease in EPS clearly aligns with the notion that the acquisition has led to dilution.