Break up break up fees

Bankrupt Adelphia cable made a deal to sell to Time Warner and Comcast. I forget the size, somewhere around $17bn. Then Cablevision comes along, also wanting to buy. But part of the deal is a 2.5% break-up fee. In other words, if Adelphia backs out, it owes TWC about $400mm.

These break-up fees have become pretty standard in merger agreements. Obviously, though, they're not in the best interests of shareholders (where these are public companies) or creditors (in the case of bankruptcies like Adelphia).

Private companies can make whatever deals they want. For public companies, though, these fees should be outlawed.