In economics, accretion refers to the gradual and incremental growth or increment in the value of an asset due to natural growth or external additions. It is also related to the process of adjusting the value of a bond, specifically, a discount bond to reflect the accumulation of interest over time. In the case of mergers and acquisitions, accretion refers to an increase in per-share earnings of the company after an acquisition.
Accretion can be thought about like a snowball that gets bigger slowly as it rolls down a hill. It is the process of something gradually increasing in size or value over time. It could be a savings account slowly growing with interest or the profits of the company which increases year by year or the value of the property going up.
Accretion is used in various areas of economics which include investment, finance, and business growth. Investors might consider accretion for gauging the long-term potential of their investments. Companies would take it into account when they evaluate mergers and acquisitions to determine if the deal will increase their earning per share or not.
In investment, a bond purchased at a discount may accrue interest over time which leads to accretion in its value as it approaches maturity. In the case of a merger, a larger company acquires a smaller one, and the earnings per share of the combined entity increases. This increase is referred to as accretion.
Source: A to Z of Economics by Dr. NC Raghavi Chakravarthy