Drop Dead Fee

DEFINITION of 'Drop Dead Fee'

Fee paid by a borrower to a lender when an acquisition deal falls through. A drop dead fee is applied to compensate the loaning institution for lost interest if a loan is secured and then becomes unnecessary because of a failed deal. The funds have to have been borrowed for acquisition purposes.

BREAKING DOWN 'Drop Dead Fee'

Primarily used in the United Kingdom, a drop dead fee relates to loans made towards the acquisition of another company. If a company wishes to fund an acquisition with and the acquisition deal falls through, the borrowing company must return the borrowed money and pay a drop dead fee penalty.