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.

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.
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negotiators have been seeking steep breakup fees when engaging in M&A activity with Chinese firms due to the difficulty of closing deals in Chinas increasingly strict regulatory climate.
Comment: Anthem nixes deal, pleasing Cigna, but the companies will now fight over breakup fees and damages
In the document, an agreement and plan of merger, the company also talks about breakup fees each company might have to pay if the deal falls apart.
Complications have arisen regarding the number of Orange shares and votes Bouygues will receive from the deal, in addition to how potential breakup fees will be distributed.
Companies also should consider increased scrutiny while negotiating breakup fees. AT&T famously had to pay T-Mobile USA $4 billion when their proposed merger fell apart.
The contract gave Triad the right to continue seeking a higher price for 40 days and to pay the private groups up to $40 million in breakup fees. Triad shares closed the week up $2.87, or 6%, at $52.23.
However, it is the authors' experience that breakup fees are generally expected in significant transactions and are generally supported by the various constituents and ultimately authorized by the court, but they must in all cases be reasonable.
In practice, a buyer and its counsel should be aware of the identity of the particular bankruptcy judge involved, and his or her "track record" on the consideration of breakup fees and overbid rights.
Observation: As with breakup fees, the bankruptcy court has given another taxpayer-friendly decision.
The sides hammered out a last-minute deal in March that had Eastern Outfitters agree to run a private sale with SportsDirect instead that reduced the risk of breakup fees upsetting the bankruptcy estate's wind down and left avoidance actions intact.
Accordingly, all "no-shop" restrictions and the related breakup fees provisions applicable to the company under the merger agreement, will no longer apply and potential offers and bidders can evaluate the company based on the recent decline in its share price.
The joint bidders would also collect $0.55 million in breakup fees if another bid was successful and Working Ventures, if it accepts a higher bid, would owe them half oft he difference between the bids.