Drop-Dead Fee

Drop-dead fee

A term of British origin referring to fee that must be paid if a deal falls through because of financing issues.

---

Drop-Dead Fee

A fee that a borrowing company pays a lender if the borrower intends to use the funds from the loan to finance the acquisition of another company. The drop-dead fee is only paid if acquisition does not take place. That is, suppose Company A borrows from a bank to buy Company B. If Company B's shareholders refuse the offer and Company A has already borrowed the money, Company A must return what it has borrowed to the bank and pay the drop-dead fee to compensate the bank for lost interest. The term is most common in the United Kingdom.