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.

BREAKING DOWN '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.

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RELATED FAQS
  1. In M&A how does an all-stock or all-cash deal affect the equity of the buying company? ...

    Mergers and acquisitions (M&A) are forms of corporate restructuring that are becoming increasingly popular in the modern ... Read Answer >>
  2. What is the difference between a merger and an acquisition?

    Read about the legal and practical differences between a corporate merger and corporate acquisition, two terms often used ... Read Answer >>
  3. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    Learn about mergers and acquisitions and how these two corporate actions differ based on the size and participation of the ... Read Answer >>
  4. What's the difference between a merger and an acquisition?

    Learn about the difference between mergers and acquisitions. Discover what factors may encourage a company to merge or acquire ... Read Answer >>
  5. How long does it take for a merger to go through?

    Corporate mergers and acquisitions can vary considerably in the time they take to be completed. There are a number of individual ... Read Answer >>
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    In a general sense, mergers and takeovers (or acquisitions) are very similar corporate actions - they combine two previously ... Read Answer >>
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