termination fee

termination fee: USA

Also known as a break fee or a termination fee. This term has a number of meanings. In the context of:

• Mergers and acquisitions, a payment from the seller to the buyer if a merger or acquisition transaction is not completed as a result of certain actions by the seller, such as breaching a no-shop clause or entering into a transaction with a different buyer. Break-up fees help the buyer cover the expenses of planning, negotiating and investigating a transaction if it is not completed, as well as protecting the buyer if the seller receives a competitive offer. Break-up fee provisions are typically included in the purchase or merger agreement. Compare this to reverse break-up fees which are payments from the buyer to the seller if a transaction is not completed as a result of certain actions by the buyer.

• Acquisition financings, a payment from the buyer to the agent banks if the buyer is paid a break-up fee by the seller because the deal did not close. Break-up fees for bank loans range from merely reimbursement of the agent banks' out-of-pocket expenses (including legal fees) after the buyer's expenses are covered (or shared with the buyer on a pro rata basis) to a specified percentage of the fee received by the buyer (such as 25% net of reimbursement of the buyer's out-of-pocket expenses).

See also

reverse break-up fee

reverse termination fee

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Termination fee — A termination fee is a charge levied when a party wants to break the term of an agreement or long term contract. They are stipulated in the contract or agreement itself, and provide an incentive for the party subject to them to abide by the… … Wikipedia
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break-up fee — USA Also known as a break fee or a termination fee. This term has a number of meanings. In the context of: • Mergers and acquisitions, a payment from the seller to the buyer if a merger or acquisition transaction is not completed as a result of… … Law dictionary

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termination fee

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