The fee is payable on defined termination events, principally acceptance of a superior proposal. Fees are typically expressed as a percentage of deal value and must be reasonable to survive fiduciary duty scrutiny.
Reverse termination fees run the other direction.
Alternative Names:
Termination Fee|Breakup Fee
Why it Matters?
Fee reasonableness is reviewed against whether it deterred competing bids, and Delaware courts have accepted fees in the low single digits as percentages of equity value while scrutinizing higher figures alongside other deal protections. The analysis is cumulative rather than isolated, so a moderate fee combined with matching rights and a no-shop provision may collectively preclude a topping bid. That combination is what draws fiduciary challenges.
Frequently Confused with
Related terms
Frequently asked questions
How is fee reasonableness assessed?
What is a reverse termination fee?
