When Google announced its acquisition of Motorola Mobility for $12.5 billion recently, commentators reported on the typical deal metrics – premium (Google’s offer represents over a 63% premium), and multiples. However, Google’s offer of a $2.5 billion reverse break fee, an unprecedented amount, also caught people’s attention. Google’s exposure to Motorola Mobility if they cannot complete the deal is just over 25% of the transaction’s enterprise value and considerably more than reverse break fees announced in various public deals since 2010. The reverse break fee is payable if regulatory clearance is not achieved. Competition/antitrust clearance to complete the transaction needs to be obtained in the US, EU, Canada and certain other countries. In addition, Google has agreed that it will use “reasonable best efforts” to obtain antitrust clearances and failing to do so will entitle Motorola Mobility to claim a further $1 billion from Google. By contrast, Motorola Mobility is obligated to pay Google a fee of $375 million if it is unable or unwilling to complete.
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