Bifurcated Termination Fees and Common Termination Events
New York - September 3, 2014

Termination fees are a deal protection mechanism that help safeguard targets and acquirers from third party interlopers by requiring one or both parties to pay a termination fee should one of them walk away from the transaction prior to its completion.

Generally, a termination fee is disclosed as a total fee, in millions of dollars. On certain occasions, this fee is bifurcated depending on the termination event(s) by which a party is exercising its right to back out of a deal. Among these termination events are breach of merger agreement; drop dead date exceeded; failure to close; occurrence of an intervening event; lack of financing; lack of regulatory approval; lack of shareholder approval; suffering from a material adverse change; acceptance of a superior proposal; and withdrawal of recommendation.

MergerMetrics has been actively reviewing recent and historical public transactions to establish a comprehensive universe of deals with bifurcated termination fee information. A total of 54* transactions have been identified to-date, of which, 27 deals have bifurcated fees on the target side only, 13 on the acquirer side only, and 14 on both target and acquirer sides - all such deals announced between August 2009 and July 2014.

Common Termination Events for Deals with Bifurcated Termination Fees