A reverse termination fee is cash the buyer owes the target if a signed merger dies for reasons on the buyer's side, typically a failed antitrust review or a buyer that cannot or will not close. It is the mirror image of the ordinary break fee, which the target pays the buyer if, say, the target's board walks away for a better offer. Both numbers sit in the merger agreement and the 8-K that announces it. For merger-arbitrage traders, the size of the reverse fee, and the list of events that trigger it, is one of the fastest reads on how much a buyer stands to lose by walking.
Break fee vs. reverse termination fee
The two fees protect opposite parties. The break fee (also called the target termination fee) compensates the buyer for time and expense if the target backs out, usually because its board changes its recommendation or signs a superior proposal. The reverse termination fee compensates the target, which spent months under a no-shop clause and gave up other bidders, if the buyer cannot deliver.
The Proofpoint–Varonis agreement, signed October 15, 2026, shows the split cleanly. Per the Varonis 8-K, Varonis owes Proofpoint $211.7 million if, among other cases, its board changes its recommendation or it terminates to accept a superior proposal. Proofpoint owes Varonis a "reverse termination fee of $423,300,000" if it "fails to consummate the Merger" after the closing conditions are met and Varonis confirms it is ready to close, or if Varonis terminates over an uncured Proofpoint breach.
Some agreements make part of the fee reciprocal. In Skyworks–Qorvo, either side owed the other $298,692,098 for a superior-proposal or recommendation-change exit, while only Skyworks owed a separate $100 million tied to regulatory failure. That deal closed on October 5, 2026, so neither fee was paid; TTFY tracked the closing in its Skyworks–Qorvo coverage.
What triggers a reverse termination fee
The trigger list matters as much as the dollar figure. In the filings reviewed here, three families of triggers show up:
- Antitrust or regulatory failure. Salesforce owes Braze $300 million if the deal is terminated because it has not closed by the Outside Date or because "a final, non-appealable injunction or applicable regulatory law permanently prohibits the Merger," subject to conditions in the agreement. Skyworks' $100 million was keyed to injunctions under "certain antitrust or foreign investment laws" or missing required approvals by the Outside Date.
- Failure to close or financing risk. A private-equity buyer's fee can be keyed to a failure to close once conditions are satisfied. Proofpoint is a Thoma Bravo portfolio company backed by equity and debt commitment letters. The Varonis 8-K says Proofpoint's obligations to close "are not subject to any financing condition," and Varonis's right to force a closing through specific performance is subject to conditions that include the debt financing having been or being funded at closing.
- Buyer-side vote or board change. In stock deals where the buyer's holders also vote, the buyer can owe a fee for changing its own recommendation. TPG Mortgage owes Cherry Hill $7.99 million under circumstances that include a change of recommendation or acceptance of a superior proposal.
Nothing is owed before a signed agreement exists. On November 4, 2026, Helen of Troy said its board rejected an unsolicited, non-binding $37.00-a-share cash proposal from Empower Brands, owned by Spectrum Brands and Oaktree. A rejected proposal carries no break fee and no reverse fee.
How fees are sized: percent of equity value
The standard yardstick is the fee divided by the deal's equity value, which is the offer price times the target's shares. The formula is simple:
Fee % = fee ÷ (offer price per share × shares outstanding)
Headline deal values can mislead because many of them are enterprise values that include debt. Salesforce priced Braze at "approximately $5.66 billion in enterprise value." The equity value on basic shares is lower: 113,584,427 shares (10-Q cover, September 1, 2026) × $47.50 = about $5.40 billion. The $300 million reverse fee is 5.56% of that equity figure and 5.30% of the $5.66 billion enterprise value. The table below uses basic share counts from SEC filings, so the percentages are approximate.
| Deal (signed) | Approx. equity value | Target break fee | Buyer reverse fee | Break / reverse as % of equity |
|---|---|---|---|---|
| Proofpoint–Varonis $VRNS (Oct. 15, 2026) | $5.74B (115.3M sh × $49.75) | $211.7M | $423.3M | 3.69% / 7.38% |
| Salesforce–Braze $BRZE (Oct. 19, 2026) | $5.40B (113.6M sh × $47.50) | $191.39M | $300M | 3.55% / 5.56% |
| Skyworks–Qorvo (Oct. 27, 2025; closed Oct. 5, 2026) | $9.76B (92.65M sh × $105.31 implied) | $298.69M (reciprocal) | $100M regulatory | 3.06% / 1.02% |
| TPG Mortgage–Cherry Hill $CHMI (Aug. 9, 2026) | $114.5M (36.9M sh × $3.10 implied) | $4.7M | $7.99M | 4.10% / 6.98% |
| Thermo Fisher–Qiagen (Mar. 3, 2020) | $10.1B ($11.5B less $1.4B net debt) | $367M | $575M | 3.63% / 5.69% |
Two patterns stand out. Target-paid fees ran in a tight 3.1% to 4.1% band across all five deals. Buyer-paid fees ranged far wider, from 1.02% at Qorvo to 7.38% at Varonis. The Qorvo implied price is the $105.31 the joint proxy calculated from Skyworks' October 27, 2025 close, and it checks out: 0.960 × $75.84 + $32.50 = $105.31. The Cherry Hill figure uses MITT's $7.09 close on August 7, 2026: 0.3063 × $7.09 + $0.41 + $0.52 = $3.10. Thermo's equity figure is arithmetic on its own press release, which valued Qiagen at about $11.5 billion "which includes the assumption of approximately $1.4 billion of net debt."
Worked example: Proofpoint–Varonis at the November 4 close
One live 2026 deal, using filed numbers and the November 4, 2026 close:
| Item | Figure | Arithmetic |
|---|---|---|
| Cash offer | $49.75 | Per Varonis press release |
| Shares outstanding | 115,298,568 | 10-Q cover, Oct. 30, 2026 |
| Approx. equity value | $5.74B | 115,298,568 × $49.75 |
| Break fee (Varonis pays) | $211.7M = 3.69% | $211.7M ÷ $5,736M |
| Reverse fee (Proofpoint pays) | $423.3M = 7.38% | $423.3M ÷ $5,736M |
| Reverse-to-break ratio | 2.0× | $423.3M ÷ $211.7M |
| Reverse fee per share | $3.67 | $423.3M ÷ 115.3M shares |
| $VRNS close, Nov. 4, 2026 | $48.80 | Yahoo Finance history |
| Gross spread | $0.95 = 1.95% | ($49.75 − $48.80) ÷ $48.80 |
| Pre-rumor close, June 22, 2026 | $32.71 | Per Varonis press release |
| Fee per share vs. gap to pre-rumor price | 22.8% | $3.67 ÷ ($48.80 − $32.71) |
The last line is a sizing exercise, not a forecast. Where $VRNS would trade if the deal broke cannot be known, and the fee goes to the company's treasury rather than straight to holders. But it frames the stakes. Proofpoint's fee is twice the target's, and it equals roughly a fifth of the gap between the November 4 close and the undisturbed price. TTFY covered the announcement in Proofpoint's $6.3 billion Varonis deal.
How merger-arb traders read a big reverse fee
Arbitrageurs buy the target below the offer and collect the spread at closing, so their main risk is a broken deal. A reverse fee changes that math in three ways:
- Commitment signal. A buyer that agrees to pay 5% to 7% of equity value if it fails is signaling that it expects to close, and it has a costly reason to accept remedies or fight a regulator rather than walk.
- Trigger fit. The fee only counts if it covers the risk that actually threatens the deal. Braze's $300 million is aimed at regulatory blocks. Varonis's $423.3 million is aimed at a buyer that does not close. Qorvo's regulatory fee was 1.02% of equity, a thin cushion against the antitrust and foreign-investment risks its trigger covered, even though the deal closed.
- A cap as well as a floor. A reverse fee can also set the most a buyer pays to exit. Traders read the specific-performance language alongside the fee to see whether the target can force a closing or can only collect cash.
The fee is one input; timeline, competing bids and the buyer's own stock price also move the spread. For how listed options are adjusted once a deal closes, see the sibling explainer on options in a buyout.
Checklist: common mistakes with termination fees
- Assuming any failed deal pays the reverse fee. Thermo Fisher's $575 million was payable under specified circumstances, including a failure to obtain the required antitrust clearances by the long stop date. The 2020 tender instead lapsed when the minimum acceptance condition was not met, and per Thermo's August 2020 8-K, Qiagen paid Thermo "an expense reimbursement payment of $95,000,000." TTFY's Thermo–Qiagen 2020 recap walks through the bid.
- Dividing by enterprise value. Using Braze's $5.66 billion understates the fee percentage compared with equity value.
- Reading one fee number for a two-tier structure. Qorvo's $298.7 million and $100 million fees had different triggers.
- Treating a proposal as a deal. Unsolicited bids such as the $37.00 approach to Helen of Troy carry no fees at all.
- Skipping the source. Fees appear in 8-K Item 1.01, the merger agreement filed as Exhibit 2.1, and the proxy's "Termination Fees" section.
This is general information about deal terms, not legal or investment advice. More deal coverage is on the TTFY homepage and in the Analysis section.
Bull/Bear Verdict
Bull Case: A reverse fee that is large relative to equity value and keyed to the risk that actually threatens the deal gives the buyer a costly reason to close, and it leaves the target with cash if the buyer fails. Proofpoint's $423.3 million is 7.38% of Varonis's approximate equity value, twice the target's fee.
Bear Case: The fee pays only on its listed triggers and goes to the company, not to holders. A deal can die on a vote or a tender condition with no reverse fee at all. In 2020 Qiagen paid Thermo $95 million instead of collecting $575 million.
FAQ
Is a reverse termination fee the same as a breakup fee?
No. A breakup or break fee is paid by the target to the buyer, usually after a board recommendation change or a superior proposal. A reverse termination fee runs the other way, from buyer to target, typically for regulatory failure or a failure to close.
Who receives a reverse termination fee?
The target company receives it as corporate cash. Shareholders benefit only indirectly through the company's balance sheet, which is why fee-per-share figures are a rough yardstick.
How big is a typical reverse termination fee?
In the five agreements above, buyer fees ranged from 1.02% (Skyworks–Qorvo's regulatory fee) to 7.38% (Proofpoint–Varonis) of approximate equity value, while target fees clustered between 3.06% and 4.10%.
Where can traders find the fee amounts?
Search EDGAR for the target's 8-K filed at signing. Item 1.01 summarizes both fees and their triggers, the full merger agreement is attached as Exhibit 2.1, and the later proxy or S-4 repeats them under "Termination Fees."