Journal article

Authors list: Bannier, Christina E.; Ewelt-Knauer, Corinna; Khaled, Mohamed Amin; Kölling, Jan-Philipp

Publication year: 2021

Journal: Accounting, Economics and Law

ISSN: 2194-6051

eISSN: 2152-2820

Open access status: Bronze

DOI Link: https://doi.org/10.1515/ael-2020-0049

Publisher: De Gruyter

Abstract: 
Termination fees have become a frequently employed non-price term in acquisition contracts. They allow the breaking party to walk-away from the transaction after paying a fee to the remaining party. While the inclusion of termination fees has been shown to increase contracting efficiency, the fee size has received only scant academic interest. This is surprising as termination fees are often asymmetric, i.e., of unequal magnitude for the bidder and the target. Based on an international dataset of 25,026 global acquisitions between 2012 and 2015, we find that bidder and target characteristics influence the structure of termination fees. More precisely, we show that target termination fees are higher if the target is insolvent. Bidder termination fees are higher, in contrast, if the bidder is an institutional investor. Our study thus contributes to understanding the influence of bargaining power on non-price terms by examining the structure of termination fees.

Harvard Citation style: Bannier, C., Ewelt-Knauer, C., Khaled, M. and Kölling, J. (2021) The Symmetry and Asymmetry of Bidder and Target Termination Fees in Acquisitions, Accounting, Economics and Law, Article 20200049. https://doi.org/10.1515/ael-2020-0049

APA Citation style: Bannier, C., Ewelt-Knauer, C., Khaled, M., & Kölling, J. (2021). The Symmetry and Asymmetry of Bidder and Target Termination Fees in Acquisitions. Accounting, Economics and Law, Article 20200049. https://doi.org/10.1515/ael-2020-0049