Bargain Purchase

Financial assets acquired for less than fair market value. In a bargain purchase business combination, a corporate entity is acquired by another for an amount that is less than the fair market value of its net assets. Current accounting rules for business combinations require the acquirer to record the difference between fair value of the acquired net assets and the purchase price as a gain in its income statement, thereby providing an immediate boost to the acquirer's equity.

In the aftermath of the 2008 market crash, the enormous number of financial companies that were trading at huge discounts to their book value presented an unmatched opportunity for bargain purchases. Firms that were able to take advantage of these distressed priced companies and assets were able to add to their asset base at relatively little cost. However, only a limited number of financial companies were acquired in this manner.


Investment dictionary. . 2012.

Look at other dictionaries:

  • bargain purchase — The purchase of assets or other goods for substantially less than the fair market value. A bargain purchase can be made when the vendor is in liquidation or is otherwise financially distressed …   Accounting dictionary

  • Bargain Purchase Option — An option in a lease agreement that allows the lessee to purchase the leased asset at the end of the lease period at a price substantially below its fair market value. The bargain purchase option is one of four criteria, any one of which, if… …   Investment dictionary

  • Bargain-purchase-price option — Gives the lessee the option to purchase the asset at a price below fair market value when the lease expires. The New York Times Financial Glossary …   Financial and business terms

  • bargain-purchase-price option — Gives the lessee the option to purchase the asset at a price below fair value when the lease expires. Bloomberg Financial Dictionary …   Financial and business terms

  • bargain purchase option — See: capital lease …   Accounting dictionary

  • bargain — bar·gain 1 n often attrib [Old French bargaigne negotiation, haggling, from bargaignier to haggle] 1: an agreement between parties that settles what each gives or receives (as a promise or performance) in a transaction between them compare… …   Law dictionary

  • Bargain — Bar gain, n. [OE. bargayn, bargany, OF. bargaigne, bargagne, prob. from a supposed LL. barcaneum, fr. barca a boat which carries merchandise to the shore; hence, to traffic to and fro, to carry on commerce in general. See {Bark} a vessel. ] 1. An …   The Collaborative International Dictionary of English

  • Bargain and sale — Bargain Bar gain, n. [OE. bargayn, bargany, OF. bargaigne, bargagne, prob. from a supposed LL. barcaneum, fr. barca a boat which carries merchandise to the shore; hence, to traffic to and fro, to carry on commerce in general. See {Bark} a vessel …   The Collaborative International Dictionary of English

  • purchase — [n] possession obtained with money acquirement, acquisition, asset, bargain, booty*, buy, gain, investment, property, steal; concepts 446,710 Ant. sale, sell purchase [v] buy, obtain achieve, acquire, attain, come by, cop*, deal in, earn, gain,… …   New thesaurus

  • purchase — I (New American Roget s College Thesaurus) Act of buying Nouns 1. purchase, buying, emption; purchasing power; bargain (see cheapness); installment buying or plan, time purchase plan, buying on time, deferred payment, layaway plan, revolving… …   English dictionary for students

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