J.P. Morgan Releases Annual M& A Holdback Escrow Report

Analysis Finds Year-Over-Year Increase in Claim Occurrence

NEW YORK, September 10, 2012 – J.P. Morgan (NYSE: JPM) Treasury Services, a full-service provider of cash management, trade finance, treasury solutions and escrow services, today released its 2012 M&A Holdback Escrow Report. The annual report, now in its fourth year, details the importance of escrow accounts used as a tool for risk mitigation and asset protection in M&A transactions.

The major trend since the 2010 study is the upward shift in the transaction size of M&A deals utilizing holdback escrows[i]. This shift has increased the value of corresponding escrow deposits, as seen in the analysis of escrow deposit size within the report. For the 2012 study, 33 percent of terminated deals had at least one claim. Other key findings in the 2012 report include:

  • On average, buyers were able to recover 59 percent of their initial claim amount
  • The average escrow holds 9 percent of the underlying M&A purchase price
  • The average underlying M&A transaction size for deals involving financial buyers is more than twice as large as the average for deals with strategic buyers
  • Escrows involving financial buyers were more concentrated in the 13 to 18 month range (55 percent) than those involving strategic buyers (42 percent)

“As advisors continue to seek ways to protect their clients in a volatile market, the 2012 Holdback analysis will help provide a broad look at what are considered market terms,” said Nick Scarabino, Managing Director and Global Head of J.P. Morgan Escrow Services Sales. “The support we’ve received from the M&A legal and advisory community over the years has been invaluable in shaping and refining this report, which is based upon J.P. Morgan proprietary data.”

New in the 2012 M&A Holdback Escrow Report are year-over-year comparisons to recent studies, which provide insight into trends in the market surrounding escrow size, duration, sector breakdown and claim occurrence. Other highlights include a reexamination of the behavioral differences between financial and strategic buyers, a deep dive into the frequency of scheduled disbursements to the seller, and details about account bifurcation and composition.

The 2012 M&A Holdback report reviewed a sample of active J.P. Morgan escrow transactions with publically available acquisition information that originated in the United States in 2011, and terminated deals covering a slightly broader time period.

J.P. Morgan provides customized end-to-end Escrow services to help customers better manage financial risk associated with a range of business transactions, such as mergers and acquisitions, capital raisings and litigation settlements. Acting as an independent third party, J.P. Morgan holds assets in escrow until the commitments of the agreement are fulfilled.

J.P. Morgan administers more than 5,000 escrow accounts globally with more than $40 billion in assets under management and continues to expand with Escrow services currently in Australia, Brazil, Canada, China, France, Hong Kong, India, Mexico, Singapore, South Africa, Switzerland, the United Kingdom, the United States, and Vietnam.

For additional information about J.P. Morgan’s 2012 M&A Holdback Escrow Report, please visit www.jpmorgan.com/escrow. To connect with J.P. Morgan’s Escrow team, contact Nicholas Scarabino at Nicholas.A.Scarabino@jpmorgan.com.

About J.P. Morgan Treasury Services
J.P. Morgan’s Treasury Services business is a full-service provider of innovative cash management, trade, liquidity and escrow services -- specifically developed to meet the challenges treasury professionals face today.   More than 135,000 corporations, financial institutions, governments and municipalities in over 180 countries and territories entrust their business to J.P. Morgan.  J.P. Morgan Treasury Services is one of the world's largest providers of treasury management services and a division of JPMorgan Chase Bank, N.A., member FDIC. More information can be found at www.jpmorgan.com/ts.

About JPMorgan Chase & Co.
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.3 trillion and operations in more than 60 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

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[i] With a holdback escrow, a percentage of the purchase price of an M&A deal is placed in an escrow account and held until the terms of the escrow agreement have been met. The agreement enables the buyer to retrieve funds for purchase price adjustments and make claims against the account in the event that the seller fails to satisfy certain representations and warranties of the purchase agreement.
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