J.P. Morgan Treasury Services has released its 2012 M&A Holdback Escrow Report which 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. 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.
For additional information about J.P. Morgan’s 2012 M&A Holdback Escrow Report, please visit www.jpmorgan.com/escrow. To obtain a copy of the 2012 M&A Holdback Escrow Report, contact Nicholas Scarabino at Nicholas.A.Scarabino@jpmorgan.com.
© 2012 PEPD • Private Equity’s Leading News Magazine • 9-11-12
