I would expect that to only get paid if solely one side were responsible for blowing up the deal. This is expressly saying both have mutually agreed.
“On December 17, 2023, the Company and Figma mutually agreed to terminate the Merger Agreement and entered into a mutual termination agreement effective as of such date (the “Termination Agreement”). The mutual termination of the Merger Agreement was approved by the Company’s and Figma’s respective Boards of Directors. In accordance with the terms of the Termination Agreement, the Company will make a cash payment to Figma in the previously agreed amount of one billion dollars ($1,000,000,000) (the “Termination Fee”) within three business days following the date thereof. The Termination Fee is the sole and exclusive remedy under the Merger Agreement, and the Company and Figma have each waived any and all other claims in connection with the Merger Agreement and the transactions contemplated thereby.”
Three business days to wire $1b, the week before Christmas. That has to be a fun phone call with the bank.
If you think im joking no I’ve designed it for major banks.
For a business like Adobe, yes. They’ll probably want a verification call. Plenty of funds, however, handle similarly-sized transactions with completely electronic verifications.
For large payrolls, it would be done over wire (between the employer and payroll processor). The employer has leverage and wants to keep the float.
For many payroll operations between big employers and payroll processors it’s an inner bank ledger transfer as the big payroll processors have good reason to maintain accounts at many banks.
Vice versa is also true. If you have a very large payroll your treasury team is not put out by having accounts at lots of banks.
This is common. But so are wires.
On the bank side nothing really happens unless Figma decides it wants to withdrawal all 1 billion. Then X bank will owe Y bank money, that loan will be balanced at some point. It will probably take a few days so Figma will be told it needs a few days.
Even if Figma decides to pay all their employees a share, that's also just - 50k Figma, + 50k Bob Smith in a computer somewhere.
There is no actual exchange of money until stuff is balanced at some point or you withdrawal. It's all just 1s and 0s in a record.
That was at least so when we sold our company.
Their latest report with the SEC would indicate how much “cash” they regularly have on hand.
A failed acquisition attempt can be very damaging to the company being acquired. You can lose employees who don’t want to work at the new entity that never happened. It can change your product roadmap (are you really going to invest in directions the acquirer won’t want after completion?) and make your executive team start job hunting. Etc.
So it’s not unreasonable or uncommon for the acquirer to agree to such a provision. And the board was presumably highly involved in a large offer like that.
The Board signed off on the deal. Given Adobe’s stock is up for the day, I don’t think shareholders are crying over this termination fee.
Is that allowed?
Banks can handle this. But probably not for free.
"He also noted that the original terms call for Adobe to pay a $1 billion break-up fee even if the deal falls through over regulatory issues."
https://www.barrons.com/articles/adobe-stock-figma-acquisiti...