What characterizes an accretive transaction in finance?

An accretive transaction in finance is characterized by an increase in the acquiring firm's earnings per share (EPS) following the acquisition. This outcome typically occurs when the earnings generated by the acquired company outweigh the costs associated with the acquisition, including any debt or equity used to finance the deal. A rising EPS suggests that the acquisition adds value to the shareholders of the acquiring firm, making the transaction favorable.

In the context of mergers and acquisitions, identifying whether a transaction is accretive or dilutive is important for stakeholders. An accretive deal enhances the financial performance of the acquiring firm, reflecting positively on management's decision-making and potentially leading to an increase in stock prices.

The other options do not accurately define what characterizes an accretive transaction. For instance, paying a price that exceeds synergies gained would suggest that the deal does not provide adequate value, leading to a dilution of earnings, rather than an accretive effect. Similarly, a decrease in market share would not relate directly to EPS enhancement and could indicate that the acquisition is not effectively adding value. Lastly, financing a deal exclusively through equity is not a defining characteristic of accretive transactions; financing can vary and still result in an accretive outcome if the acquisitions are valued highly