In an all-stock deal, what determines if it is accretive or dilutive?

In an all-stock deal, it comes down to comparing P/E multiples. If the buyer's P/E is higher than the P/E it is paying for the target, the deal is accretive. If the buyer's P/E is lower, it is dilutive.

The intuition is that the buyer is using its stock as currency. A buyer trading at 20 times earnings effectively pays for each new dollar of earnings with shares valued at 20 times that buyer's earnings, an earnings yield of 5%. If it acquires the target at 15 times earnings, it receives earnings with a 6.7% yield. Buying 6.7% earnings with 5% currency raises EPS. Reverse the numbers, a buyer at 12 times acquiring a target at 18 times, and EPS falls.

Two details matter. The target's P/E must be based on the offer price including the premium, not its undisturbed share price. And the rule ignores other adjustments: synergies can turn a dilutive deal accretive, while extra amortization from writing up intangible assets and transaction costs can do the opposite. So I use the P/E rule as a quick answer and confirm with a full pro forma calculation.