Are Earnings Accretive Acquisitions Good?

Often, management justifies huge mergers and acquisitions (M&A) with accretive earnings. That earnings per share (EPS) would increase post-M&A.

Are accretive earnings a good measure of shareholder value?
One of the best ways to probe whether you can trust the advice that a theory is offering you is to look for anomalies—something that the theory cannot explain.

Consider this, if management puts $1 billion into fixed deposit earning 3% in interest. Generating $30 million in interest income immediately, an earnings accretive move.

But was it the best use of capital?

It does not matter whether earnings are accretive post-acquisition. In other words, whether the EPS does up, down, or sideways in the short-term does not matter.