Bootstrapping
M&A / Merger ModelA high P/E acquirer buying low P/E targets in stock, generating EPS growth by arithmetic rather than by improving anything.
When an acquirer trading at 25 times earnings buys a business at 12 times entirely in stock, EPS rises automatically. The acquirer issues shares priced on its own high multiple to buy earnings priced on a lower one, so it takes in more earnings than the equity it hands over represents.
No synergies are required and neither business has improved. That is precisely why EPS accretion on its own is a weak argument for a deal.
The risk is the re rating. The combined group has to justify the acquirer's multiple afterwards, and if the market re prices it toward the target's lower multiple, shareholders lose despite the higher earnings per share.
The historical caution is the conglomerate era, where serial acquirers produced years of EPS growth by exactly this route and de rated sharply once the acquisitions stopped, which is what turned a growth story into a discount.
Worked example
A serial acquirer on 25x buys three businesses on 12x, each in stock, over three years.
EPS grows every year with no synergies and no operational improvement, purely from exchanging expensive equity for cheap earnings.
When the acquisitions stop, growth stops, and the market re rates the group toward the multiple its underlying businesses deserve. That de rating is what ended the conglomerate era.