They thank Peter Pope (editor) and an anonymous referee for suggestions on improving the paper. The authors also acknowledge the financial support of the Lawrence Bloomberg Chair in Accountancy and of the Social Sciences and Humanities Research Council of Canada. They thank participants at the 2006 JBFA Capital Markets Conference in Thessaloniki, at the 4th International Corporate Governance Conference in Montreal 2005, at the CAAA Conference 2005 and seminar participants and colleagues at HEC Montreal, Concordia University, University of Edinburgh, Université de Paris XII and ESSEC Business School.
Termination Fees in Mergers and Acquisitions: Protecting Investors or Managers?
Article first published online: 5 JUN 2007
Journal of Business Finance & Accounting
Volume 34, Issue 3-4, pages 541–566, April/May 2007
How to Cite
André, P., Khalil, S. and Magnan, M. (2007), Termination Fees in Mergers and Acquisitions: Protecting Investors or Managers?. Journal of Business Finance & Accounting, 34: 541–566. doi: 10.1111/j.1468-5957.2007.02032.x
- Issue published online: 5 JUN 2007
- Article first published online: 5 JUN 2007
- kill fees;
- break fees;
- termination fees;
- mergers and acquisitions
Abstract: Institutional investors closely monitor termination fees in mergers and acquisitions (M&A). We argue that their magnitude reflects either agency problems or efficiency considerations. Focusing on M&A involving Canadian targets between 1997 and 2004, we assess the determinants and market impact of termination fees. Our findings show that the Thomson's SDC Platinum™Worldwide Mergers&Acquisitions Database underestimates their extent. Results suggest that termination fees are essentially an efficient mechanism as they are relatively higher in M&A with high merger costs, a cash component and expected operating synergies. Stock market returns surrounding the deal announcement do not differ across levels of relative termination fees.