breakup fee

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Breakup Fee

In some agreements, a fee that a seller must pay a buyer if the seller decides not to close the deal. The seller usually does this if it receives a better bid from another buyer after it has already entered negotiations. The breakup fee exists to compensate the first buyer, who has no control over the change in situation. It is usually 1-3% of the sale price. See also: Topper fee.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

breakup fee

A provision in a takeover agreement that requires a firm to pay the investment banker a large sum of money if another firm takes over the target company. A breakup fee tends to discourage other firms from making bids for the target. See also topper fee.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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