Escrow

Definition

Escrow resolves the trust gap between parties at signing. The seller wants certainty of payment; the buyer wants certainty that no post-closing surprises (hidden debts, misrepresentations, R&W claims) cost them money. Holding part of the price in escrow for a defined window: typically 12-18 months for R&W claims, 6-12 months for working-capital adjustments: gives the buyer a claim buffer without forcing the seller to carry full risk.

In Benelux practice escrows are administered by a notary, a law firm, or a specialist escrow agent (JTC, Intertrust). Cost: €2-10k for the duration, depending on amount and complexity. Release conditions must be precisely defined in the SPA: vague language inevitably triggers disputes.

When it matters

In roughly 70% of Benelux SME share deals above €1m. For sellers: avoid excessively long escrow windows (>18 months) or amounts (>15% of price): that's working capital you can't redeploy.

Frequently asked

How much of the price typically goes into escrow?

5-15% of total purchase price for Benelux SME deals between €1m and €25m. Higher when R&W risk is larger (weak historical data, owner-dependency).

How long does a typical escrow run?

12-18 months for R&W claims. Some deals run tiered escrows: 6 months for working-capital, 12 months for general R&W, 24 months for fundamental R&W (title, tax, environmental).

What happens if the buyer files a claim?

The escrow agent holds the money until the dispute resolves: via negotiation, arbitration or court. That can take months to years. Good SPA clauses with explicit claim procedures speed it up.