Ticking Fee

What Is a Ticking Fee?

A ticking fee is a compensation mechanism in M&A transactions that requires the acquirer to pay an ongoing daily or monthly fee to the target’s shareholders when the deal closing is delayed beyond an agreed date. The fee compensates sellers for the time value of money and the opportunity cost of remaining bound to a transaction that has not yet completed.

Ticking fees are most common in transactions where regulatory approval timelines are uncertain — particularly cross-border deals requiring merger control clearance from multiple competition authorities — and in private equity transactions that require debt financing commitments. The fee acknowledges that, from the signing of definitive agreements to closing, the seller bears the risk of the business performing poorly while being unable to pursue alternative options.

When Ticking Fees Apply

Ticking fees become relevant when there is a material gap between signing the SPA and completing the transaction. This gap occurs when:

• Regulatory approvals are required from one or more competition authorities — including SAMR (China), CCI (India), KPPU (Indonesia), JFTC (Japan), FIRB (Australia), or the European Commission — and the approval timeline is uncertain
• Financing conditions require the buyer to obtain committed debt financing before closing, creating execution risk
• Third-party consents — change of control approvals from major customers, landlords, or licensing bodies — take longer than anticipated
• Government or ministerial approvals are required in regulated sectors (financial services, healthcare, telecommunications)

In Australia, the typical exposure window is 30-90 days (FIRB review). In India, it can extend to 3-9 months (CCI + FEMA). In China, SAMR reviews for complex transactions can run 6-12 months.

How Ticking Fees Are Structured

Calculation Basis

Ticking fees are typically expressed as an annualised rate applied to the equity consideration, calculated daily:

• Rate range: 4–8% per annum (equivalent to 0.011–0.022% per day) is the most common range in APAC M&A transactions
• Reference point: Applied to the equity value or total consideration, not the enterprise value
• Trigger date: Begins accruing on the agreed long-stop date (often called the outside date), not the signing date

Example

A transaction with $200M equity consideration and a 6% per annum ticking fee beginning 60 days post-signing would accrue approximately $333,000 per day after the trigger date. If the deal closes 30 days late, the seller receives an additional $10M in consideration.

Payment Mechanics

Ticking fees are typically:

• Accrued from the trigger date and paid at closing as an addition to the agreed consideration
• Added to purchase price — the most seller-friendly structure, treated as consideration rather than separate payment
• Paid separately — sometimes structured as periodic payments during an extended delay, though this is less common in APAC

Negotiating Ticking Fees

Seller’s Perspective

Sellers should negotiate ticking fee provisions proactively in transactions where regulatory or financing uncertainty is present. Key negotiating points:

• Rate — 6–8% per annum is reasonable for transactions with significant regulatory risk; 4% reflects the minimum meaningful compensation
• Trigger date — negotiate the shortest possible free period before fees accrue; 30-45 days post-signing is reasonable
• Cap — sellers should resist absolute caps on total ticking fee accumulation; buyers will push for 3-5% of total consideration as a maximum
• Termination rights — if the outside date passes and regulatory approval has not been received, sellers should have the right to terminate and retain any accrued ticking fees as a break-up fee

Buyer’s Perspective

Buyers negotiate ticking fees from the position of minimising cash exposure and preserving deal optionality:

• Free period — negotiate the longest possible delay before fees begin accruing
• Rate — push toward 4-5% per annum rather than 6-8%
• Trigger conditions — argue that fees should not accrue if delays are caused by seller-side actions or third-party consents outside buyer’s control
• Cap — insist on an absolute maximum to contain downside exposure

Ticking Fees in Asia Pacific Transactions

Ticking fees are particularly relevant in APAC cross-border transactions due to the frequency and length of multi-jurisdictional regulatory reviews. Deals requiring parallel approvals from SAMR (China), CCI (India), and a third jurisdiction can face 9-15 month sign-to-close timelines without any fault from either party.

In practice, ticking fees in APAC transactions serve two functions. First, they compensate the seller economically for the regulatory delay. Second, they create a financial incentive for the buyer to actively pursue and manage the regulatory approval process rather than allowing it to drift.

For business owners selling APAC businesses with cross-border buyers, a ticking fee provision is a commercially important negotiating point that an experienced M&A advisor should raise in the heads of agreement or letter of intent stage — well before SPA negotiation. See the M&A advisory process guide and the share purchase agreement glossary entry for broader context on deal term negotiation.