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Break Fee
A payment made by one party to another if the deal is terminated, often to compensate the seller for the time and resources invested in the transaction.
Implications
A payment made by one party in a transaction, typically in mergers and acquisitions, to the other party if the deal falls through for specific reasons.
Example
Example: A company agrees to a break fee if it decides to back out of a merger after accepting a better offer from another bidder.
Related Terms
Different from a termination fee, which is broader, a break fee is specifically tied to certain conditions being met, such as accepting a competing offer.
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