What does breakup fee mean?

What Is a Breakup Fee? A breakup fee is used in takeover agreements as leverage on the seller against backing out of the deal to sell to the purchaser. A breakup fee, or termination fee, is required to compensate the prospective purchaser for the time and resources used to facilitate the deal.

What is a break up clause?

A breakup fee provision is included in the letter of intent. An LOI outlines the terms & agreements of a transaction before the final documents are signed. Therefore, the breakup fee seeks to protect buyers for the time, resources, and expenses that they have incurred in pursuing the transaction.

What is a backout fee?

If a homeowner’s payment was entered incorrectly, or if the payment has bounced due to insufficient funds, a backout payment will need to be performed. During the backout process, an NSF (Non-Sufficient Funds Fee) can also be applied.

What is a reverse breakup fee?

Also known as a reverse termination fee or a reverse break fee. A fee paid by the buyer if it breaches the acquisition agreement or is unable to consummate the transaction due to lack of financing and the seller terminates the agreement in accordance with its terms.

What is the definition of a break fee?

What is a ‘Break Fee’. A break fee is a fee paid to a party as compensation for a deal or contract failure.

What are some examples of a breakup fee?

Some of the events that may trigger the breakup fee provision include the following: Company’s board of directors changes their mind. Shareholders fail to approve the deal. The seller chooses a competing bidder. Seller opts to open the deal to the public rather than just negotiating with the buyer named in the preliminary agreement.

Where do you find break fees in a lease agreement?

Break fees are commonly included in mergers and acquisitions deals but may also be found in common lease agreements and may be written into derivatives like swap contracts.

When to use a break fee in an M & A?

Reviewed by Adam Hayes. Updated Jul 3, 2019. A break fee is a fee paid to a party as compensation for a broken deal or contract failure. Two common situations where a break fee could apply is if a mergers and acquisitions (M&A) deal proposal is terminated for pre-specified reasons and if a contract is terminated before its expiration.

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