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. Merger

    A merger is an agreement that unites two existing companies into ...
  2. Mergers and Acquisitions - M&A

    A merger is a combination of two companies to form a new company, ...
  3. Merger Mania

    A period of time with significant merger and acquisition activity ...
  4. Merger Of Equals

    A merger of equals is when two firms of about the same size come ...
  5. Horizontal Merger

    A merger occurring between companies in the same industry. Horizontal ...
  6. SEC Form 425

    The prospectus form that companies must file to disclose information ...
Related Articles
  1. Investing

    A Guide to Spotting a Reverse Merger

    A reverse merger is a type of corporate action that can be profitable for investors who know what to look for.
  2. Personal Finance

    Current Account Deficits: Government Investment or Irresponsibility?

    Deficit can be a sign of trouble for some countries, and of health for others. Find out what it means when more funds are exiting than entering a nation.
  3. Insights

    The Pros & Cons of a Trade Deficit

    Is a trade deficit, also known as a current account deficit, beneficial or detrimental to a country's economy?
  4. Investing

    Dow-DuPont Deal May Face EU Objections (DOW, DD)

    EU regulators could issue a formal statement of objections next month for the proposed merger between Dow and DuPont.
  5. Investing

    How the Dow-DuPont Merger Affects Dividends (DOW)

    The impending merger between Dow Chemicals and DuPont could mean good things for both companies in future.
  6. Investing

    5 Big M&A deals in 2015 (PFE, AGN)

    Learn how these mergers and acquisitions helped make 2015 a boom year for M&A deals, with the total value of the companies involved surpassing the U.S. budget.
  7. Investing

    Why Do Some Failed Mergers Result in Break-Up Fees?

    When mergers go bad, there's often a break-up fee involved of as high as 3-5% of the value of the proposed merger.
  8. Trading

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  1. 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 >>
  2. How can I develop a profitable merger arbitrage strategy?

    Learn how to utilize a simple merger arbitrage trading strategy to profit from the typical temporary price discrepancies ... Read Answer >>
  3. Reading the effect of fiscal deficits on an economy

    Take a deeper look into the real impacts of government budget deficits on the economy, and why government financing reduces ... Read Answer >>
  4. Why do some mergers and acqusitions fall through?

    Most merger and acquisition (M&A) activities are carried out successfully, but from time to time, you will hear that a deal ... Read Answer >>
  5. Why do companies merge with or acquire other companies?

    The reasons for company mergers and acquisitions include synergy, diversification, growth, improving competition, and supply ... Read Answer >>
Hot Definitions
  1. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  2. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  3. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  4. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  5. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center