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ยท Posted on
May 18, 2022

Elon Musk has put the Twitter deal on a 'temporary hold' and sent the CEO a poo emoji like the adult he is

Elon's worried about the proportion of bots on Twitter, or so he says.

What's the key learning?

  • Mergers and acquisitions can take months or years to complete.
  • Breakup fees are generally used to stop a seller (or sometimes buyer) from backing out of a deal).

๐Ÿ‘‰ Background: So, we know Elon Musk is finalising his deal to buy Twitter after a pretty aggressive acquisition approach. He's also been quite vocal about implementing a new free speech policy, as well as cleaning up Twitter's bot problem.

๐Ÿ‘‰ What happened: Twitter says less than 5% of its users are spam bots (aka fake accounts that mimic real people). Musk is calling BS (literally, he sent the current CEO a poo emoji). So, he's put the deal on hold pending details that support Twitter's estimate.

๐Ÿ‘‰ What else: He say's he's still committed, but if the deal fails Elon might have to pay a $1 billion breakup fee.

๐Ÿ”” What's the key learning?

๐Ÿ’ก A breakup fee is used in takeover agreements, generally to stop a seller from backing out of a deal. They're usually 1-3% of the deal's value- a hefty hit.

๐Ÿ’กMergers and acquisitions can take months (or even years) to complete, and they require a lot of resources to facilitate. Think lawyers, PR professionals etc. So, breakup fees are included in contracts to motivate the seller to close the deal.

๐Ÿ’กIn Elon's case, this would be a reverse breakup fee payable by the buyer. They're becoming more common as competition heats up in public offerings.

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