An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.
Our sample now covers 978 strategic negotiated transactions announced between January 1, 2005, and June 30, 2016. Of these, 114 transactions, or 11.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.
If we just look at the deals announced since January 1, 2011, the mean was 5.7% and the median was 5.1%, suggesting a slightly higher fee over the last five years. Since January 1, 2011, the fees ranged from a low of 2.3% to a high of 21.0%. The chart below gives the frequency of antitrust reverse breakup fees since January 1, 2011.
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NB: The percentage intervals on the horizontal axis are not of equal size.
Since January 1, 2011, of the 48 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 34, or about 71%, were cleared without any antitrust challenge. Two transactions (AT&T/T-Mobile and Halliburton/Baker Hughes) were terminated in the course of litigation with the U.S. antitrust enforcement agencies, two (Sysco/US Foods and Staples/Office Depot) were terminated after the FTC obtained a preliminary injunction in federal district court, and ten were subject to a DOJ or FTC consent order.