Accretion

The definition of Accretion varies depending on its application. In venture capital and private equity, Accretion may refer to the increase in a shareholder’s ownership percentage when other investors fail to participate in subsequent funding rounds, leading to a reduced overall share count. This phenomenon, known as ownership Accretion, benefits existing investors by enhancing their stake without requiring additional investment.

Convertible securities

Accretion may refer to the gradual increase in the value of a security as it approaches maturity or conversion. For example:

• Zero‑coupon bond: Accretion occurs as its value increases over time to reflect its final payout at maturity.
• Preferred shares: Accretion describes the rise in value as they near conversion terms.

Mergers and acquisitions

Accretion occurs when an acquired company adds to the earnings per share (EPS) of the acquiring company, enhancing shareholder value.

Importance and contrast with dilution

Accretion is an important concept in fundraising and investment valuation, as it directly impacts investor returns, ownership dilution, and long‑term financial performance. It is often contrasted with dilution, where an increase in the number of outstanding shares reduces existing investors’ ownership percentages.

Summary

In summary, Accretion in fundraising and investment refers to the progressive increase in value, ownership, or financial benefit, making it a key metric in evaluating investment growth, deal structuring, and capital appreciation.