Market Standards: Average Termination Fee as Percentage of Deal Size

Sometimes a seller makes a commitment to sell its business only to find that another party would have paid more for that business. Although fiduciary duties may play a role in a seller’s termination of a signed deal, buyers will try to include a breakup fee to give the buyer some degree of recovery for expenses, time, and opportunity costs if the seller ends up terminating the deal for a superior proposal or some other reason specified in the transaction agreement. 

According to Market Standards, 97 transaction agreements were filed between September 1, 2022 and November 30, 2022 with a value of $100M or greater. Of those 97 deals, only 28 deals included termination fees. The average termination fee as a percentage of deal size ranged from 0.01% to 7%, with an overall average of 3% as a percentage of deal size. The average termination fee size as a percentage of deal size ranged from 2.4% for deals valued between $1B and $5B to 3.4% for the deals valued between $100M and $500M.

Market Standards is a powerful tool for researching and comparing over 38,000 M&A transactions from 2008 to the present. Leverage Market Standards to find on-point precedent language on the most highly-negotiated transactions with over 150+ M&A deal points. To learn more about how it can help M&A attorneys work more efficiently, click here.

Discover Emerging Trends in M&A Transactions

Learn more about drafting break-up fees in this termination fee clause. 

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