Incompatibility. Infidelity. Federal regulators' insistence that your union constitutes anticompetitive behavior.
Every breakup has its reasons and most of them are painful. Not to mention the hole your high school sweetheart tore through your soul, but business breakups often have an added sting—you can feel them in your wallet.
- Separation fees are a standard part of mergers and acquisitions and are intended to discourage parties from backing out of a deal.
Last week's headlines were dominated by the latest proposed mega-deal, Capital One's $35 billion offer for Discover. Along with that: a potential breakup fee of $1.38 billion.
What happens if the deal goes wrong?
While Capital One publicly expresses confidence that it will cross the finish line and create the largest credit card company in the country, its termination fee provisions tell a different story, according to Axios.
- Capital One won't pay Discover if regulators block the merger, revealing executives' nervousness that the government won't approve the deal.
Expect this regulatory drama to engulf both companies in the second half of 2024, but if the relationship breaks down sooner, the party that breaks it off will likely write a big check.
There have been many such checks throughout history
For example, Dish paid DirecTV a $600 million breakup fee after the pair's satellite venture was rejected in 2002, and Staples paid Office Depot $250 million for its 2016 flirtation, which was abandoned by the judge .
But none hurts as much as AT&T's failed takeover of T-Mobile in 2011 – the company ended up paying its competitor over $4 billion and funding improvements that helped T-Mobile better compete with AT&T.
However, money does not heal all wounds
Like any breakup you've experienced, the average business split involves emotional pain.
Design platform Figma recently took in $1 billion in breakup fees when Adobe's planned $20 billion purchase fell through, but the money only came in handy after it “got the rug pulled out,” according to the New York Times.
Figma's previous IPO plans have now been delayed in vain, internal morale has been damaged – Figma employees spent a year in limbo, putting in extra work to seal a financial windfall that is no longer certain.
Of course, the only thing colder is your high school sweetheart's ice-cold heart.
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