Merger Deficit

AAA

DEFINITION of 'Merger Deficit'

An accounting term used to describe the situation when the total value of the share capital used to purchase another company is less then the total value of the equity purchased. The merger does not necessarily have to be an all-stock acquisition.

INVESTOPEDIA EXPLAINS 'Merger Deficit'

In other words, a merger deficit arises when a company uses funds it raised in new stock issues to purchase the stock of another company. The stock purchased must be worth more then the share capital used to purchase it in order for the deference to be classified as a merger deficit.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Share Capital

    Funds raised by issuing shares in return for cash or other considerations. ...
  4. Takeunder

    An offer to purchase or acquire a public company at a price per ...
  5. Acquisition Premium

    The difference between the estimated real value of a company ...
  6. Merger

    The combining of two or more companies, generally by offering ...
RELATED FAQS
  1. How does transfer pricing help business?

    Transfer pricing involves the trade of goods or services between two related companies, and both can come out the winner. ... Read Full Answer >>
  2. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
  3. How important are contingent liabilities in an audit?

    Contingent liabilities, when present, are very important audit items because they normally represent risks that are easily ... Read Full Answer >>
  4. How does quantifying fixed overhead volume variance show whether a company is profitable ...

    Fixed overhead volume cannot definitively prove a company is profitable, but it can be used to provide an excellent indication ... Read Full Answer >>
  5. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    The terms "merger" and "acquisition" are used together because they both describe processes by which two companies become ... Read Full Answer >>
  6. What does inventory turnover tell an investor about a company?

    The inventory turnover ratio determines the number of times a company's inventory is sold and replaced over a certain period. ... Read Full Answer >>
Related Articles
  1. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  2. Investing

    Mergers Put Money In Shareholders' Pockets

    Learn the five ways mergers and acquisitions can increase a company's value.
  3. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  4. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  5. Investing Basics

    How Much Do CPAs Make?

    If you're considering becoming a CPA, here's what you might expect to earn.
  6. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  7. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.
  8. Investing

    American Airlines & US Airways Merger: It Matters!

    While the two airlines' merger creates a new giant in the industry and reduces choice for consumers and employees, investors should benefit.
  9. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  10. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center