Series 79 practice questioneasyDeal Protections
A breakup fee in a merger agreement is best described as:
- AA payment required by the acquirer if the target walks away for any reason.
- BA fixed payment to the target if the deal is delayed.
- CA reimbursement for legal expenses only.
- DA payment the target must make to the acquirer under certain circumstances, such as accepting a competing bid.✓ Correct answer
Explanation
Why D — A payment the target must make to the acquirer under certain circumstances, such as accepting a competing bid.
Breakup fees are typically paid by the target to the acquirer if the target accepts a superior offer. Mistaking who pays the fee or when it is triggered is a common misconception.
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