Netflix Inc.’s $72 billion acquisition of Warner Bros. Discovery Inc. includes one of the biggest breakup fees of all time — a $5.8 billion penalty that Netflix has agreed to pay its target if the deal falls apart or fails to win regulatory approval.
At 8% of the deal’s equity value, the fee is well above the average even in big-ticket dealmaking, signaling Netflix executives’ confidence they can convince global antitrust watchdogs to let the transaction go ahead. The average breakup fee in 2024 was equal to about 2.4% of the total transaction value, according to a report from Houlihan Lokey.
Netflix’s multibillion-dollar pledge is also a sign of how heated the bidding war got for control of the iconic Hollywood studio. As part of a sweetened proposal earlier this week, rival suitor Paramount Skydance Corp. had more than doubled the proposed breakup fee in its offer to $5 billion.
Warner Bros., meanwhile, would have to pay a $2.8 billion reverse breakup fee if its shareholders vote down the deal. If Warner Bros. were to accept a rival offer, the new buyer, in effect, would be on the hook for that fee.
Here are some of the biggest breakup fees in M&A history, according to data compiled by Bloomberg:
AOL/Time Warner Inc.
Deal value: $160 billion
America Online Inc. agreed to pay a fee of about $5.4 billion if it backed out of its agreement to buy Time Warner Inc. Time Warner would pay about $3.9 billion if it broke up the transaction under certain conditions.
Percentage of deal value: 3.4%
Outcome: Completed
Pfizer/Allergan
Deal value: $160 billion
The breakup fee could have been as high as $3.5 billion, but the merger had a contingency that it would be lower if there were changes to tax law. Pfizer ended up paying just $150 million after the US cracked down on corporate tax inversions
Percentage of deal value: 2.2% (but paid less than 0.1%)
Outcome: Terminated
Verizon/Verizon Wireless
Deal Value: $130 billion
Breakup Fee: This deal for Vodafone’s stake in Verizon Wireless was complicated. Verizon promised to pay a breakup fee to Vodafone of $10 billion if it couldn’t get financing for the deal, or $4.64 billion if its board changed its recommendation to shareholders to vote in favor of the transaction. Meanwhile, Vodafone would have owed $1.55 billion to Verizon if its board changed its mind, and either side would have had to pay $1.55 billion to the other if shareholders turned down the transaction. Vodafone also would have had to pay that $1.55 billion if an unfavorable tax ruling made it too onerous to complete the deal.
Percentage of deal value: 7.7%
Outcome: Deal completed
AB InBev/SAB Miller
Deal value: $103 billion
Breakup fee: AB InBev agreed to pay a breakup fee of $3 billion if it failed to get approval from regulators or shareholders and instead walked away from what was then the biggest corporate takeover in UK history.
Percentage of deal value: 2.9%
Outcome: Completed
AT&T/T-Mobile USA
Deal Value: $39 billion
Breakup fee: AT&T agreed to pay Deutsche Telekom a $3 billion breakup fee in cash, as well as transferring radio spectrum to T-Mobile and striking a more favorable network-sharing agreement.
Percentage of deal value: 7.7%
Outcome: Withdrawn after regulatory opposition
Google/Wiz
Deal value: $32 billion
The companies agreed that Google would pay a breakup fee of about $3.2 billion — a huge chunk of the transaction value — if the deal didn’t close.
Percentage of deal value: 10%
Outcome: Completed
