Legal Commentary

Current Trends in Reverse Break-Up Fees

By davidwanetick

Traditional break-up fees are paid to suitors when a target withdraws from an acquisition. Reverse break-up fees are paid when an acquirer backs out of a deal. Financial sponsors are becoming more conservative in their deal making. This is evidenced by the low reverse breakup fees they are writing into deals. For example, when Cerebus Capital Management withdrew its buyout of United Rentals, Cerebus' breakup fee was just 2.5% of the deals value. When J.C. Flowers & Co. withdrew from its deal to acquire SLM Corp., their payment to SLM was less than 4% of the $25 billion transaction.

These are some of the issues discussed at IncreMental Advantage's Mergers & Acquisitions Due Diligence Conference Series. More information is available at www.incrementaladvantage.com or by contacting neomi@incrementaladvantage.com.

Full post as published by Vertical Pulse on January 22, 2008 (boomark / email).