Which of the following is true regarding breakup fees?
A) They are sometimes characterized as liquidated damages.
B) The Securities and Exchange Commission prohibits the payment of breakup fees.
C) Breakup fees are typically 20 to 25 percent of the value of the deal.
D) They are sometimes characterized as liquidated damages, and breakup fees are typically 20 to 25 percent of the value of the deal.

Question

Quizplus · Accepted Answer

Breakup fees are sometimes characterized as liquidated damages. This means that these fees are predetermined damages that the parties agree to in case the deal falls through.

Answer: None of the above 
 The Securities and Exchange Commission (SEC) does not prohibit the payment of breakup fees. In fact, the SEC requires companies to disclose any potential fees, including breakup fees, that may be paid in connection with a merger or acquisition.

Answer: None of the above 
 It is difficult to generalize the amount of breakup fees as they vary depending on the size and complexity of the deal. While 20 to 25 percent may be common in some situations, other deals may have lower or higher breakup fees.

Which of the Following Is True Regarding Breakup Fees