Buyer beware: sell-side termination fees are on the rise

M&A transactions typically involve costly and time-intensive processes, and for this reason parties often seek to limit completion risk by negotiating a termination fee. Indeed, the recent 2018 SRS Acquiom Deal Terms Study reveals that the use of termination fees in private M&A transactions doubled in 2017. From 2012 to 2016, the use of termination fees remained relatively stable, with approximately 10% of private M&A deals including termination fees.[1] In 2017, however, the use of termination fees increased dramatically, with 21% of private M&A deals reportedly incorporating termination fees.[2] Interestingly, the overall increase in the use of termination fees is attributable primarily to increased use of sell-side termination fees (fees a buyer agrees to pay in the event it terminates the deal). While use of buy-side termination fees increased from 2% of all deals in 2016 to 5% in 2017, this is less notable given that these particular fees has fluctuated…

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