A break-up fee is a fee payable to a corporate advisor by the seller if the seller terminates the engagement before completion or unilaterally walks away from a transaction the advisor has procured. Break-up fees in Australian sub-$20M advisor agreements are typically structured as a fixed amount (e.g. $50,000 to $250,000) or as a percentage of the success fee that would have been earned.
Break-up fees should be calibrated to actual advisor effort. Sellers should push back on break-up fees that bear no relationship to the work performed, and resist fees triggered by a buyer’s failure to complete (rather than the seller’s withdrawal).