An acquirer at a 20x forward P/E buys a target at a 13x forward P/E, 100% stock, at a 20% premium. Is the deal accretive in year 1?

• Accretive: the premium lifts the effective P/E paid to 13 x 1.2 = 15.6x, still below the acquirer's 20x
• Accretive, but only once the premium is earned back through synergies over the first few years
• Dilutive, since paying a 20% premium over the target's price always makes an all-stock deal dilute EPS
• Dilutive, because the target's 13x sits well below the acquirer's 20x, so the lower-multiple earnings drag combined EPS down
• Neutral, because in an all-stock deal the new shares and the acquired earnings offset in year one