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. Acquisition Premium

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

    The combining of two or more companies, generally by offering ...
  5. Takeunder

    An offer to purchase or acquire a public company at a price per ...
  6. Share Capital

    Funds raised by issuing shares in return for cash or other considerations. ...
Related Articles
  1. Investing Basics

    The Merger - What To Do When Companies ...

  2. Investing

    Mergers Put Money In Shareholders' Pockets

  3. Options & Futures

    The Basics Of Mergers And Acquisitions

  4. Trading Strategies

    Selecting Mergers & Acquisitions Advisories ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center