J.P. Morgan study highlights importance of escrow accounts in M&A
Oct 21, 2011
J.P. Morgan Treasury Services recently released its 2011 M&A Holdback Escrow Report. The report, now in its third year, helps the M&A community better understand the dynamics of holdback escrows and their value as a risk mitigation tool. The study uses J.P. Morgan proprietary data and provides information not available elsewhere. Findings are based on analysis of a sample of active escrow transactions originated in the United States with J.P. Morgan in 2010, and terminated deals covering a slightly broader time period in which J.P. Morgan Escrow Services acted as escrow agent for the buyer and the seller.
The 2011 M&A Holdback report reviewed J.P. Morgan escrow transactions with publicly available acquisition data and looks at a variety of factors, including the percentage of escrows that have claims filed against the account; the types of claims; the average size and life span of the escrows and more. A comparison of data offers the added advantage of seeing how deal terms are trending in the M&A context. Highlights from the study include:
- 28 percent of terminated deals had at least one claim
- The average size of the claim requested by the buyer was for 61 percent of the escrow
- Buyers were able to recover an average of 74 percent of the amount originally claimed for, or 45 percent of the total escrow deposit