Breakups are expensive: AT&T's failed to purchase of T-Mobile resulted in a $4 billion break up fee

On March 20, 2011, AT&T announced a monster $39 billion deal to purchase T-Mobile from German telecom giant Deutsche Telekom. While it was questionable whether the deal would pass regulatory scrutiny, just months before Comcast and NBC completed their $30 billion merger, so AT&T thought, why not give it a shot? But the US Justice Department was quick to block on anti-competitive grounds, and AT&T knew if it went to trial, it would be a long, drawn out, but most importantly, uphill battle, so they terminated the deal. But baked into the merger agreement was a break fee. Usually, breakup fees are a low single-digit percentage of the deal’s value, but in this case, it was more like 10%: AT&T was on the hook to pay $3 billion in cash, as well as rights to some of the cellular airwaves aka spectrums that it owned, which had a book value of $1 billion, but a market value of $3 billion. To my knowledge, this $4 billion (conservatively speaking) breakup fee was the largest ever paid out. In comparison, the recently announced $35 billion merger between Capital One and Discover is similar in size, but the breakup fee is only $1.38 billion, or a third of what AT&T paid out more than a decade ago. $T $TMUS $COF $DFS #AT&T #T-Mobile #Merger #BreakupFee #DeutscheTelekom #RegulatoryScrutiny #Antitrust #JusticeDepartment #Comcast #NBC #MergerAgreement #Spectrum #CapitalOne #Discover #MergersAndAcquisitions #Telecommunications #Finance #businessdeal This content is for educational purposes and is not financial advice. I do not provide recommendations and am not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results. Explanations are not guaranteed to be error-free. Hope you enjoyed this #FinanceFunFact!