Oct 08, 2026 by Offer

Moelis Accretion/Dilution Question 2027: How to Analyse

The moelis dilutive accretive debt equity answer: it depends — compare the target's earnings yield to the cost of funding. If the earnings added exceed the after-tax interest on new debt plus the earnings drag of new shares, the deal is accretive; otherwise dilutive. Commonly reported by candidates, this tests analytical reasoning, not memorization.

What This Question Assesses

This is the classic 'it depends' question testing whether you can reason from first principles. The interviewer wants the accretion/dilution framework: EPS impact equals target earnings contribution minus funding costs. Candidates who jump to 'accretive' or 'dilutive' without analysis fail; candidates who structure the comparison pass.

How to Answer: Moelis Dilutive Accretive Debt Equity

Step 1 — Define the test: a deal is accretive if pro forma EPS rises, dilutive if it falls. State this first.
Step 2 — Build the comparison: add the target's net income contribution, then subtract after-tax interest on new debt and account for new shares issued.
Step 3 — Apply the shortcut rule: all-debt deals are accretive when the target's earnings yield exceeds the after-tax cost of debt; all-stock deals when the target's P/E is lower than the acquirer's.
Step 4 — Note the mixed case: with both debt and equity funding, weight the two effects — the answer truly depends on the proportions and terms.

Example: "It depends on the math: I would compare the target's earnings contribution against the after-tax interest on the new debt plus the dilution from new shares. If earnings added exceed funding costs, it is accretive — otherwise dilutive."

Common Mistakes on Moelis Dilutive Accretive Debt Equity

Answering 'accretive' or 'dilutive' outright — the correct first word is 'it depends,' followed by the framework.
Forgetting the tax shield — interest is tax-deductible, so use after-tax cost of debt in the comparison.
Ignoring synergies and purchase accounting — flag them as adjustments even in a simplified answer.

'It depends' is only the right answer if you can show the math behind it. Practice the earnings-yield shortcut until you can deliver it in under a minute.

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FAQ

What is the quick rule for all-stock deals?

Accretive if the target's P/E is lower than the acquirer's P/E — you are buying earnings more cheaply than your own are valued.

What is the quick rule for all-debt deals?

Accretive if the target's earnings yield (E/P) exceeds the after-tax interest rate on the new debt.

Does accretion mean a good deal?

Not necessarily. Accretion/dilution is an accounting measure — a dilutive deal can still create value, and an accretive one can destroy it.

What is pro forma EPS?

Earnings per share as if the transaction had already happened — combined earnings divided by the new share count.

Preparing for Moelis & Company's interview? Our 2027 Moelis Investment Banking Online Assessment Tutorials has practice questions and answers — $79 one-time, instant download.