Breakup Fee

A deal-ending friction penalty incurred by a party for withdrawing from an agreement, intended to serve as a deterrent by inflicting significant financial harm.

That is, the seller wants the deal to happen, so the buyer pays a big fee if it doesn’t.

Why might this happen? Like...Shmoogle (a behemoth) wants to buy Shmeikle (a tiny company). Both are in the same industry, but Shmeikle is worried that the Justice Department might outlaw the sale based on Sherman Act/anti-monopoly/anti-trust rules. Having “sold out to The Man,” Shmeikle’s business would have been harmed, as its distribution network of hippies would have all viewed the company differently...than the hippie hipster image it held before selling out. So they needed to have enough cash from Shmoogle to make up for the damage.

See also: Alimony. The ironically named “Two Girls, One Shuck Co.” is an oyster catering company that employs hundreds of women serving thousands of bi-valves each year. In an effort to diversify, the company enters an agreement to purchase Mike’s Mussels, Inc.

The girls’ lawyer, Dr. Ernie “Big E” Ville, insists on including a provision with a breakup fee of one million dollars to dissuade Mike from wasting their time by looking around for a more attractive suitor.