This post updates one we did last year analyzing antitrust reverse breakup fees in public deals since January 1, 2005.
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 926 strategic negotiated transactions announced between January 1, 2005, and December 31, 2015. Of these, 104 transactions, or 11.2% 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 4.3% of the transaction value.
Click here to view chart.
NB: The percentage intervals on the horizontal axis are not of equal size.
Significantly, of the 83 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 62, or about 70%, were cleared without any antitrust challenge. One transaction (AT&T/T-Mobile) was terminated in the course of litigation with the Antitrust Division, 20 were subject to only a DOJ or FTC consent order, two (Boston Scientific/Guidant and Hexion/Huntsman) were subject to both an FTC consent order and EC undertakings, and one (Federated/May) was subject to an assurance agreement with a group of state attorneys general. Several deals did not close for nonantitrust reasons.