BREAKUP FEES, FIRST INTRODUCED to the M&A market in the 1980s, have grown more popular over the years. According to data from research firm Dealogic, 56 percent of M&A transactions last year carried such fees, up from one third in 1997. In all, 396 deals in 2007 had breakup fees attached to them, with the average fee running $47.2 million. Initially instituted to protect buyers if target companies backed out of a deal, more recently, termination fees have been insisted upon by sellers. Such reverse breakup payments became particularly popular during the past few years’ leveraged-buyout boom, as targets such as electronic-payments processor First Data Corp. and utility TXU Corp. demanded protection in case LBO firms were unable to secure debt financing for deals.
