bootstrapping and its effect on EPS current, increase, future, decrease

grharmeyer

Why does bootstrapping increase current EPS and decrease future EPS?

Thanks.

cv4cfa

It's basically accounting trickery. The acquiring company expects to keep the same P/E post merger, so if they buy a company with a lower P/E, they are in essence buying their earnings at a discount. However the market recognizes this, so the acquirers price will adjust to account for it.

mengxu

Bootstrapping doe not increase current EPS unless the P/E of the target is lower than the acquirer's.