Breakup Fee
A breakup fee is a financial penalty imposed on a company that withdraws from a merger or acquisition agreement. This fee compensates the other party for time, resources, and missed opportunities due to the failed transaction. Breakup fees are designed to protect deal participants and ensure commitment, particularly in high-stakes negotiations where the cost of failure is significant.
Key Takeaways
- Penalty paid if a deal falls through.
- Compensates for lost time, resources, and opportunities.
- Common in M&A, private equity, and VC deals.
- Ensures commitment in transactions.
