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Breakup Fee
A fee paid by a target company to a prospective buyer if the target decides to terminate the deal to pursue another offer, compensating the original buyer for time and resources spent.
Implications
A fee paid by a target company to a potential acquirer if the target company decides to terminate the deal, often to pursue a more favorable offer.
Example
Example: In the acquisition of Time Warner by AT&T, Time Warner would have had to pay a breakup fee if it accepted a competing bid after agreeing to the deal with AT&T.
Related Terms
Similar to a break fee, but breakup fees are often used to discourage the target company from considering other offers once a deal has been agreed upon.
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