The speed of M&A deals brings challenges for buyers and sellers in escrow transactions, with specialist agents playing a key role in meeting deadlines
Time is always of the essence when it comes to merger and acquisition (M&A) deals. Companies in the heat of a transaction cannot afford to waste it.
Escrow accounts have become essential to these transactions, helping to speed up completion, setting aside monies for possible breaches of contractual obligations, or providing security for all parties between exchange and completion.
A lot of work is done behind the scenes to get an escrow account ready, often with tight turnaround deadlines of just a few days before an M&A deal completes.
Setting up the account involves co-ordinating many moving parts, including know-your-customer checks (KYC), currencies, cash management, regulatory requirements and making sure that all necessary legal documentation is in place and agreed by each stakeholder.
Managing the many moving parts of an M&A escrow
If all parties are on the same page, the process is usually smooth. If not, a lot of work is put into setting out remedies and conditions in case something doesn’t go as planned.
Ironing out the requirements of the seller’s lawyers as well as the buyer’s is one of many potential challenges the agent must deal with to prevent any delay in meeting deadlines.
In the past year or so, EU regulators have tightened requirements, with banks subject to stricter compliance criteria. This means extra paperwork must be produced to open an EU-based escrow account, sometimes catching parties based outside the EU by surprise.
Choosing the right jurisdiction to govern an escrow arrangement with buyers and sellers in different parts of the world is another major challenge for international clients. The jurisdiction chosen will of course determine the legislation governing the escrow agreement and any disputes that may arise between each party.
The escrow agent’s role is to build a bridge between buyers and sellers – enabling a smooth-running deal. Intertrust Group’s Escrow & Settlement team has the expertise and experience to meet tight deadlines and unexpected complications.
The escrow account comes into play at a critical moment of the M&A process. It lets the buyer perform due diligence while assuring the seller that payment will be forthcoming once all conditions are met.
Mitigating such risks means ensuring that we get the necessary documents for regulatory compliance, spot potential issues in advance and can swiftly resolve sticking points or administrative complications.
Meeting compliance challenges in escrow transactions
Apart from timing, the other main challenge – one that most businesses face these days – is meeting compliance demands and ensuring KYC checks have been conducted and approved in a timely manner.
We work through two levels of KYC compliance. When we take on a new transaction, it is approved first by our own compliance team, then by the compliance team of the account banks that we work with.
All parties and their advisors need to know early on what is required of them, so it is important for escrow agents to have expertise in complying with cross-border obligations. For example, US clients wanting to open an escrow account in Europe might find standards are quite different to those they are used to.
Alternatively, a transaction might involve offshore jurisdictions – such as Jersey and Guernsey – where the banks require additional financial details from the parties opening the escrow account.
As agents our aim is to take the pressure and the stress away from clients – corporates, private equity funds and ultra-high-net-worth individuals – and their business partners, by taking care of these issues for them. Transparency and effective collaboration is key to achieving this.
We can make the entire process run smoothly because we have an outstanding pool of talent within our international, multilingual team. Our services are closely regulated by European regulators and we hold a PSD2 licence.
Our M&A escrow expertise
Our Escrow & Settlement services offer multiple jurisdiction options, including the UK, Germany, the Netherlands and Sweden. Many of our account managers are lawyers with private practice M&A experience or legal qualifications.
Our extensive team has a solid background in finance, legal and compliance, which means we’re able to execute high-quality escrow arrangements that meet all regulatory obligations, while delivering strong customer service.
Thanks to our experience and teamwork, we have been facilitating complex escrows alongside high-value and cross-border paying agency mandates, with tight deadlines, for more than a decade.
Despite the complexity of the deals involved, our wide experience and industry expertise allow us to deal rapidly and efficiently with onboarding, tackling complications and ensuring deadlines are met. Every time.
How Intertrust Group can help with M&A completions
- Dedicated escrow services team to meet tight deadlines
- Account managers with previous experience as M&A lawyers
- An international, multilingual team serving multiple jurisdictions