Ticking fee

A ticking fee is a price increase payable by the buyer when the closing of an M&A transaction is delayed beyond an agreed date, compensating the seller for the time value of the sale proceeds during the delay period. Expressed as an annual percentage of the price, the ticking fee accrues daily between signing and closing, from a trigger date until completion. It is most common in transactions subject to lengthy regulatory approvals (merger control, FINMA, sector-specific licences), where the signing-to-closing window can extend to 4–9 months. Negotiated at signing, the ticking fee allocates the cost of time between the parties and incentivises the buyer to complete swiftly. For the seller of an SME, it compensates continued operation of the business and market risk during the interim period; its rate and trigger date are negotiated alongside the other closing protection clauses.

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Mechanics and calculation base: the accrual is computed as ticking fee = equity price × annual rate × number of days elapsed / 365. The rate is typically aligned with the seller's carrying cost, in the range of 6–12% per annum in Franco-Swiss transactions, equivalent to 0.016–0.033% per calendar day. The base is normally the equity value rather than the enterprise value, and sometimes only the cash portion of the consideration. The structure often includes a grace period (the first 30–60 days post-signing accrue nothing), followed by a first tranche rate and a higher rate beyond a critical threshold, creating increasing financial pressure on the buyer to complete regulatory clearance and financing close.

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Interaction with the locked-box: in a locked-box deal, the price is fixed at a historical balance-sheet date, so the seller keeps running the business for the buyer's economic benefit until closing. The ticking fee, often labelled an equity ticker in this context, compensates precisely for that gap and is usually sized by reference to the target's expected cash generation or cost of equity. The provision is negotiated alongside the Long Stop Date: a longer long stop justifies a higher ticking fee, while a short and predictable timeline may make one unnecessary. From a modelling standpoint, the accrual increases the effective price paid and must be included in the buyer's total acquisition cost and returns analysis.

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Example: on a CHF 40.0 million equity price with a ticking fee of 8% per annum after a 60-day grace period, a closing that occurs 150 days after signing triggers 90 days of accrual: 40.0 × 8% × 90 / 365 = approximately CHF 0.79 million added to the price.

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At Hectelion, we structure and negotiate ticking fee provisions in our M&A advisory mandates to protect sellers against extended closing timelines.