Given a set of rectangular modules with fixed area and variable dimensions, and a fixed rectangular circuit. The placement of Fixed-Outline Floorplanning with Soft Modules (FOFSM) aims to determine the dimensions and position of each module on the circuit. We present a two-stage Iterative Merging Placement (IMP) algorithm for the FOFSM with zero deadspace constraint. The first stage iteratively merges two modules with the least area into a composite module to achieve a final composite module, and builds up a slicing tree in a bottom-up hierarchy. The second stage recursively determines the relative relationship (left-right or top-bottom) of the sibling modules in the slicing tree in a top-down hierarchy, and the dimensions and position of each leaf module are determined automatically. Compared with zero-dead-space (ZDS) algorithm, the only algorithm guarantees a feasible layout under some condition, we prove that the proposed IMP could construct a feasible layout under a more relaxed condition. Besides, IMP is more scalable in handling FOFSM considering the wirelength or without the zero deadspace constraint.