Fast Facts About the Use of Escrows

Median escrow size holding steady at 9.9%.

In 2019, the average escrow size as a percentage of transaction value was 8.9%, while the median was 9.9%, and the median escrow duration was 15 months.

  • Escrow Size as a % of Transaction Value (Subset: 2018-2019 deals with escrows/holdbacks). 2019 Average = 8.9%; 2019 Median = 9.9%
  • Escrow Duration – Survival Period (Subset: 2018-2019 deals with escrow/holdbacks). 2019 Average = 14.9 months; 2019 Median = 15 months

Escrow percentage is larger with smaller deals.

Smaller deals as a whole have larger escrows on a percentage basis, and have greater variability as to the percentage held back in escrow. In some cases, the escrow is much larger than the standard escrow size most transactions have.

  • Transaction Value versus Average Escrow Size for Deals Under $50 Million (Data set: All deals closing in 2017-2019)

Facts About Post-Closing Claim Activity

Post-closing Purchase Price Adjustments

  • 74% of deals with a purchase price adjustment (PPA) mechanism had an adjustment
  • 42% of deals with a PPA mechanism had a buyer-favorable claim for adjustment.

Average Expense Fund Sizes

  • In 2019, the average expense fund was greater than $250,000 with more set aside for earnout deals.

Claim activity was significant in deals with claims

  • 42% of expired-escrow deals* with at least one claim had claims totaling at least $1MM.
  • Fraud claims are by far the largest, and the only claim category for which the median claim size exceeds the escrow (127%).
  • The frequency of claims increases with transaction value.
  • Regulatory claims take the longest to resolve (13-months median), whereas capitalization claims tend to resolve quickly (1-month median)


* “Expired-escrow deals” includes deals where selling shareholders have no further escrow-based indemnification obligations.

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