[RicoTubbs]

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Sorry I might be wrong, but here's the logic. The acquirer is buying a cheaper revenue stream in PE terms than it generates on its own. Cheaper = acquisition requires less shares to be issued than if the companies had identical PEs. Less shares = higher resulting EPS = lower PE. One could thus use acquisitions to peg PE to a certain ceiling while organic earnings are declining. Yes/no?

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I still don't know what you're saying. I'll guess, though. I assume you're talking about a scenario that looks like one of the following, but I'm not sure which:
1) Company A trades at a P/E of 18. Company B trades at a P/E of 15. Both firms have identical balance sheets and have cash flows that are expected to be identical in the future.

2) Company A trades at a P/E of 18. Company B trades at a P/E of 15. Based on the expected future cash flows, shares of each firm are expected to return 12% going forward.

In the case of #1, the market is mispricing one of the two companies. Firms that have identical balance sheets and identical expectations of future cash flows should have identical stock prices. The fact that the market is mispricing one stock (overvaluing A or undervaluing B) means that A is making a good decision to acquire B by issuing shares. B should be trading at A's multiple, but for whatever inefficient market reason, isn't.

In the case of #2, the market is valuing both firms correctly, which means that A has higher future cash flows than B (or a lower discount rate, whatever). If the market is rationally valuing both A and B separately, then the market will probably value the combined entity of A and B appropriately. The future cash flow growth of the combined entity will be a weighted average of the growth rates of the individual companies (+/- synergies), so the P/E ratio on the combined firm should be somewhere between the P/E ratio of A and the P/E ratio of B.

If you want to talk about this more, it would be helpful to give a simple example where you lay out some numbers (e.g., A's share price is $X, its EPS is $Y, its growth rate is Z; same thing for B) and whether you're allowing for any inefficient pricing by the market.

Probably the best place to start would be to ask: Why is the market valuing one firm's revenue cheaper than the other's?