Compass Report--The State of M&A

You will protest during the transaction that your buyer in 2000 paid seven times EBITDA for the same type of company back in 1998. Your buyer will tell you that its stock price in 1998 was 15 times EBITDA and, today, it is less than half that amount. The buyer will also respond that its transactions must be accretive rather than dilutive. This means, of course, that your deal must contribute to earnings per share rather than subtract from earnings per share—no matter how small your drop is in the buyer's bucket.