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Finance: What is a Breakup Fee? 1 Views
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Description:
What is a Breakup Fee? Breakup fees are used when companies are sold. The seller writes a breakup fee into the deal just in case the buyer backs out. It’s usually a very small portion of the actual value of the deal but enough to provide a bit of protection for the seller.
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Transcript
- 00:00
Finance a la shmoop... what is a breakup fee? Isn't this what Taylor Swift wanted [Taylor Swift on the red carpet]
- 00:07
to charge the Biebs or was that the weekend and what were mr. and mrs.
- 00:11
weekend thinking when they named him The anyway..wait is this supposed to
- 00:15
be about Selena and whatever maybe not well in corporate suitorship there's
- 00:20
the same kind of you know tit for tat that is cantaloupe wants to acquire [Cantaloupe and a grape appear]
Full Transcript
- 00:25
grape for a hundred million bucks but cantaloupe is worried that grape will
- 00:30
want to sew her seeds with you know other suitors there's the watermelon
- 00:35
wuzzle the pumpkin press and the squash squash well cantaloupe feels like it's [Cantaloupe with $100m]
- 00:41
paying a full price in the hundred million dollars it has offered but it's
- 00:45
worried about idiots meaning everyone who doesn't agree with it or isn't
- 00:49
aligned with cantaloupe yeah they're by definition an idiot according to [Man holding out a cantaloupe]
- 00:53
cantaloupe well that is a financially irrational other suitors who might want
- 00:58
to pay a hundred five million or a hundred ten million or a hundred fifteen
- 01:02
million dollars so as part of the term sheet that gives grape thirty days to[Term sheet appears]
- 01:06
fully sign or commit and be done well, grape has to pay cantaloupe a breakup
- 01:12
fee if grape decides to go with someone else who wants to buy her that breakup
- 01:17
fee is a fee for breaking up the deal between cantaloupe and grape and it
- 01:21
might be something like 10 percent of the deal and this is really important
- 01:25
because then if pineapple wants to buy grape [Pineapple appears with cantaloupe and a grape]
- 01:28
well pineapple will not only have to pay meaningfully more than the hundred
- 01:32
million dollars of cantaloupe but it'll have to pay grape the breakup fee as
- 01:37
well making the total cost of the deal the pineapple well you know pretty
- 01:41
prickly...
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