Antitrust Breakup Fees: 2023 Data and Key Takeaways for Future Dealmaking

By: Steve Albertson , Douglas N. Cogen , Thomas Ensign , Mark S. Ostrau

What You Need To Know

  • As antitrust regulators more aggressively wade into M&A transactions, breakup fees have become a valuable tool for allocating risk.
  • Most common in deals valued at $1 billion or more, the fees typically range 4–7% of the deal value and are part of a larger package of other antitrust risk-shifting provisions. They can also be tiered, with certain fees triggered under specified circumstances.
  • The arrangements are particularly popular in the life sciences—more than one-third of deals with antitrust breakup fees last year came from the sector.

Looking back at 2023 mergers and acquisitions (M&A) activity, antitrust-related breakup fees continued to be an important tool in allocating antitrust risk between deal parties. These typically take the form of a “reverse” termination fee payment from the buyer to the seller, payable upon the deal being abandoned due to the failure to obtain all required antitrust clearances. In 2023, there were at least 42 publicly announced M&A transactions involving such antitrust reverse breakup fee (ARBF) arrangements.


In recent years antitrust authorities in the United States and abroad have asserted more aggressive and novel theories of harm with respect to a variety of M&A transactions, while at the same time signaling less willingness to enter into negotiated settlements with deal parties to resolve specific antitrust objections. ARBFs have become an increasingly frequent means for contracting parties to address this uncertain regulatory environment. Although these arrangements are generally seen as addressing seller risks, by agreeing to an ARBF, a buyer can gain some certainty by being able to cap the damages that are payable in the event of a failure to obtain antitrust approval, while helping to induce an agreement with what otherwise may be a reluctant seller. The seller gains a guarantee of a monetary payment mitigating at least some of its damages (e.g., loss of customers or employees during the interim period, or decreased valuation) if the transaction fails for antitrust-related reasons.

Key Observations from 2023

In 2023, there were 42 deals above the Hart-Scott-Rodino (HSR) reportability threshold ($111.4 million in 2023) with publicly disclosed merger agreements containing ARBF provisions. For these deals, there are a few key observations for companies to consider in negotiating an ARBF in their next deal:

  • Parties typically settle on an ARBF between 4% and 7% of the deal value. In 2023, 27 (roughly 64%) of publicly disclosed deals with ARBF provisions set the fee amount between 4% and 7% of the overall deal value. This percentage is slightly higher than seen in the previous two years. Of the remainder, five deals were above 7% and the rest were below 4%. The highest ARBF in terms of percentage of deal value was for an international public deal in the defense and aerospace industry. The median ARBF in 2023 was 5%, compared to 5.3% in 2022 and 5.31% in 2021. Generally, an ARBF’s percentage of deal value tends to be smaller on deals with the highest valuations.
  • An ARBF is most common in deals valued at $1 billion or more. Approximately 85% of the ARBFs in publicly disclosed deals above the HSR threshold in 2023 were for deals valued at $1 billion or more, likely reflecting the greater perceived risk in larger deals, which may be more likely subject to significant scrutiny by antitrust authorities.
  • Life sciences deals reflected a greater propensity for ARBF arrangements than deals in other industries. While ARBF provisions appear in merger agreements across a wide range of industries, in 2023, approximately 36% of deals with disclosed ARBFs were within the life sciences sector (i.e., pharma, biotech, medical devices, and healthcare), while the remainder were spread across a wide range of industries.
  • ARBFs are not U.S.-specific. Several deals in 2023 looked beyond risks emanating from United States antitrust authorities, and ARBFs were triggered where antitrust approval was not obtained in the United Kingdom, European Union, and/or in other countries that could block consummation of the deal, or where the parties failed to obtain all required antitrust approvals (U.S. and/or non-U.S.) by the specified end date.
  • While not common, ARBFs can be tiered. ARBF payments can be subject to different triggers within the same deal. For example, one fee may be payable in the event the deal does not close because it has become subject to a final order or decision blocking consummation, while another fee may be payable in the event that clearances are simply not obtained by the agreed upon end date. In 2023, only one publicly disclosed deal contained a tiered ARBF. However, this approach should be considered as a potential creative alternative in the event more traditional approaches might not be suitable.
  • ARBFs are part of a “package deal” that includes other antitrust risk-shifting provisions. Most transactions include carefully crafted and highly negotiated covenants setting the scope and limitations on the buyer’s obligations to litigate, divest assets, or take other actions to gain antitrust approval, as well the length of the period the parties are required to expend such efforts before triggering termination rights. Parties also negotiate whether antitrust strategy is solely controlled by the buyer, or if its jointly guided by both parties, and whether either party can undertake any additional transactions prior to closing that could change the regulatory risk profile in the subject deal. Where a buyer prefers to avoid any litigation obligation or solely control strategy, etc., this often widens the window for a seller to push for an ARBF to allocate some of the antitrust risk to the buyer (i.e., the buyer gets to “buy control” of the deal by taking on downside risk of an unsuccessful antitrust process). However, the two are not necessarily mutually exclusive. In 2023, a few deals contained both an ARBF and a “hell-or-high-water” provision (i.e., a provision requiring the buyer to take all actions needed to obtain antitrust approval, including litigating or making required divestitures).

ARBFs can play a central role in negotiating antitrust risk allocation. It is important to include antitrust counsel at the outset of a deal negotiation to consider whether there is likely to be a remedy, such as a divestiture, that would gain the support of regulators, and whether that remedy could be acceptable to the buyer. Where a buyer wants to avoid or limit obligations to obtain required antitrust approvals through litigation, remedies, or other efforts, and the seller has concerns about obtaining antitrust approval, an ARBF can be an attractive strategy for allocating risk and providing sufficient comfort for sellers to enter into an acquisition.


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