Purchase premium is the amount an acquirer pays above a target company’s current market value in an acquisition. It reflects the difference between the offer price and the target’s standalone equity value based on its share price. In M&A analysis, purchase premium is closely linked to valuation assumptions, deal competition, and expected synergies. A higher premium increases goodwill on the acquirer’s balance sheet and can make a transaction harder to justify unless strong strategic benefits are expected. Purchase premium is usually positive because buyers must pay shareholders above market price to acquire control, but it can be zero or negative in distressed deals.
Learn Purchase Premium with interactive examples and practice exercises in our Mergers & Acquisitions module.
This interactive learning module helps you understand Purchase Premium through hands-on practice and real-world examples.