Acquisitions can also be a form of financial engineering ... Say Acme has 100m shares, earnings of $10m (earnings per share of 10 cents) and a share price of $2 (a price-earnings ratio of 20). Grotco has the same earnings and number of shares but its share price is just $1 (a price-earnings ratio of 10). If Acme makes an all-share bid valuing Grotco at $1.20, it will need to issue 60m new shares. The combined group will have $20m of earnings, 160m shares and earnings per share of 12.5 cents. With the help of nothing more than maths, Acme's earnings per share will have jumped by 25%. The brilliance of Acme's managers may well be rewarded with an even higher share price and a better rating, allowing it to make further deals. (Come together: Don't just sit there, bid for something, The Economist, February 23, 2013) " Write a brief letter to The Economist, explaining why, according to sound financial economics, Acme's share price may will not increase, in spite of the increase in earnings per share. 18 marke Acquisitions can also be a form of financial engineering ... Say Acme has 100m shares, earnings of $10m (earnings per share of 10 cents) and a share price of $2 (a price-earnings ratio of 20). Grotco has the same earnings and number of shares but its share price is just $1 (a price-earnings ratio of 10). If Acme makes an all-share bid valuing Grotco at $1.20, it will need to issue 60m new shares. The combined group will have $20m of earnings, 160m shares and earnings per share of 12.5 cents. With the help of nothing more than maths, Acme's earnings per share will have jumped by 25%. The brilliance of Acme's managers may well be rewarded with an even higher share price and a better rating, allowing it to make further deals. (Come together: Don't just sit there, bid for something, The Economist, February 23, 2013) " Write a brief letter to The Economist, explaining why, according to sound financial economics, Acme's share price may will not increase, in spite of the increase in earnings per share. 18 marke