M&A lawyers continue to use the tried and trusted Escrow account option because it’s a relatively quick and simple risk-mitigation tool. Outside of M&A, we are seeing an increase in use from real estate and construction lawyers.
Current trends in the market
- Escrows are especially prominent in real estate and construction transactions as they can act as a risk mitigation against the possibility of non-payment and credit risks. Employers are being asked to place a portion of the costs for the intended work into an Escrow to mitigate the risk of a periodic invoice not being paid. Similarly sub-contractors want amounts held securely in Trust to avoid the risk of a contractor insolvency
- Escrows are beginning to be increasingly used in supply chain relationships. This is to mitigate the credit risks between the manufacturer and buyer. The buyer is required to pre-pay for all or part of the costs
- M&A transactions appear to be taking longer to complete with many missing their intended completion date by over 6 months. As a possible consequence we are seeing the first escrows to cover the risk of M&A termination and the associated costs
The benefits of working with a service provider
Service providers take the responsibility of obtaining the customer KYC, opening the bank account in less than a week and administering the cash flows in and out of the escrow account. The Escrow agreement can be under various legal jurisdictions.
Escrow uses outside of M&A
The value offered by Escrows are not just limited to M&A or real estate. Indeed, they cover a wide range of business transactions. Escrows can be used to help with:
- Litigation and dispute resolution to show willingness to resolve an issue and demonstrate the ability to pay
- Pension schemes to either avoid the tax implications of a pension surplus or to address a pension deficit
- Supply chain credit risks
- Capital raising to secure investor commitment prior to launch
At Apex Group, we understand that you want a financial service provider that can take care of all your needs in one place. We also understand that your provider must be able to help your firm ensure a smooth transaction. That’s why we pride ourselves on providing for all our client needs with our single-source solution.
How can we help?
Our wide range of Escrow services enables us to provide seamless execution for our clients’ needs across a broad range of business transactions. Furthermore, our Escrow services are not just limited to domestic cash transactions. Our deep understanding of Escrow services also enables us to deal with cross-border transactions and the holding of securities.