Overpayment risk involves the dilution of EPS or a reduction in its growth rate resulting from paying significantly more than the economic value of the acquired firm.

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Overpayment for an acquired firm can result in a dilution of EPS or a reduction in its growth rate as the excess payment cannot be justified by the economic value brought by the acquired firm. This can lead to a negative impact on the financial performance of the acquiring firm.

Overpayment Risk Involves the Dilution of EPS or a Reduction