In early 2008, a year marked by turmoil in the global credit markets, Mars Corporation was able to negotiate a reverse breakup fee structure in its acquisition of Wrigley Corporation. This structure allowed Mars to walk away
from the transaction at any time by paying a $1 billion fee. Speculate as to the motivation behind Mars and Wrigley negotiating such a fee structure?

Question

Quizplus · Accepted Answer

The Answer is 2008 represented a period in which it often was difficult to get financing for transactions. The breakup fee, which normally applies to the seller to discourage them from seeking another buyer once a contract is signed, allowed Mars to back out of the deal if it could not obtain adequate financing. The fee structure compensated Wrigley for any costs it may have incurred in terms of legal, accounting, and investment banking fees as well as the loss of key employees, customers, or suppliers due to the pending change in ownership.

In Early 2008, a Year Marked by Turmoil in the Global