Holdback Escrows: Security Against the Unpredictable3/9/2010 09:45:00 AM Posted by:
As the economy rebounds and more companies are taking an optimistic view of their future growth, the conditions are ripe for merger and acquisition (M&A) transactions among public and private companies alike. And with the appetite for buying and selling, especially in such volatile economic times, comes a need to protect vigilantly against risk for acquirers and their shareholders.
The “holdback” escrow is the preferred way to mitigate risk while facilitating a smooth transaction when whole companies or company assets change hands. In a holdback escrow, the company selling assets places a portion of the transaction cost into an escrow account, where the funds remain until certain conditions are met. The escrow acts as security against unforeseen purchase price adjustments or indemnification claims.
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