When M&A deals fall apart for regulatory reasons, buyers are often on the hook to pay what's known as a reverse termination fee.
With regulators exerting more scrutiny on mergers and acquisitions, managing risk is increasingly important for companies planning nuptials. Industry participants said they expect the harsher regulatory regime to remain intact, at least until after the election — and longer — if President Biden remains in office."We're in a particularly hostile environment for deal-making when you are pursuing companies in your own industry," said Laura Born, adjunct professor of finance at University of Chicago Booth School of Business."It's all about the politics and the inability to get the deals across the finish line.
Certainly, it's a negotiation tactic that many sellers will want to seek in their agreements, and some buyers may be more willing to consider such a fee than they were a few years back. Roush knows of buyers who previously refused to entertain a reverse termination fee, but are now more willing to negotiate something small."Buyers are concerned that the seller might be willing to take a lower bid for more deal certainty," Roush said.
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