Breakup fee. What formula do you use?

searcher profile

May 05, 2019

by a searcher in Sheridan, WY, USA

We know that many times Searchers would encounter Sellers that waste a lot of time (your time). What formula do you use to come up with a value for your breakup fee to the Seller to prevent such a situation and to allow for you to recoup you cost to accountants, lawyers etc? 

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commentor profile
Reply by a professional
from Harvard University in Boston, MA, USA
Hi Eric, the advice I've always received from attorneys regarding break up fees is that they are difficult to enforce if they're not two-way. As a result, you should be prepared to agree to a mutual terms. In the end, we've never moved forward with such a provision and focused instead on other ways to test a seller's resolve to sell.
commentor profile
Reply by a searcher
in Sheridan, WY, USA
I like this clause. This may work well in conjunction with the breakup clause. My view is that as with anything else one has to mitigate their risk and would indicate to the Seller in the LOI that you mean business. (So don't even sign it if you're not committed to going all the way).
commentor profile
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