The pros and cons of merger break fee reintroduction

Author: Olly Jackson | Published: 23 Apr 2018

Break fees were banned in the UK in 2011 because they were said to be deterring competing bids for target companies and encouraging less value-creating deals. Seven years on from the investigation by the UK Takeover Panel, reverse break fees have remained prevalent, despite the belief that they would disappear due to the ban on their counterpart, and competition is more intense than arguably ever before. 

Value in the market is also said to be at an all-time low with a wide range of bidders willing to offer whatever it takes to beat the competition. With this in mind, is it time to re-introduce break fees and align the UK M&A market with the US or has the ban been worthy in achieving the panel’s objectives?

Twenty-eleven was a very different time for private equity compared to now. The sector was still recovering from the financial crisis...