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Does anyone who's participated in M&A know how they come up with a breakup fee? I believe this one is $5 Billion (per Bloomberg), and Adobe <-> Figma was $1 Bil
by doublet00th 10mo ago
Does anyone who's participated in M&A know how they come up with a breakup fee? I believe this one is $5 Billion (per Bloomberg), and Adobe <-> Figma was $1 Billion.
Interested to understand the modeling that goes into it.
- brk 10mo agoBased on some experience, it's like a bond to appear in court. The number is mostly an arbitrary calculation designed to discourage you from not following through.
- nutjob2 10mo agoLike everything else it's just a negotiated figure. Arguments to and fro would include the likelihood of breakup (such as regulatory risk, unforeseen events), how disruptive the whole process is and also simply how desperate the buyer or seller is. There's no modeling, it's a punishment or incentive. The intention is to inflict financial pain.
- bombcar 10mo agoThere’s a rough baseline of “cost to be acquired” and you start there, and do some doubling or other increases. Basically, being acquired is a pain in the assets and you want it to be worth your while to pursue it, even if it falls through, otherwise the board is looking at getting replaced.