Merger Deficit


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.

  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. Merger

    The combining of two or more companies, generally by offering ...
  6. Acquisition Premium

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