This posts highlights how two recent private equity deals - Getty Images and CHC Helicopter are using reverse termination fee structures in their contracts. In other words, if the private equity sponsor refuses to complete the transaction the only recourse of either seller is to collect the reverse termination fee. This is a shift in practice from deals in the past when there was more "certainty" in the deal through specific enforcement on the buyer to actually execute the contract. With credit markets almost dead and financial markets in general having a tough time, raising capital has not been easy and in some sense this shift in PE practice in no doubt a direct fallout. What matters is are these firms valuing the optionality of the contract and if so, how much is that impacting the value of the company being acquired.
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