Escrow Holdback

A portion of a sale price held back by the buyer or an agent for a set period to cover possible claims under the sale agreement.

Example

10% of the price is held for 18 months and released if no warranty claims arise.

Treat escrowed amounts as delayed and uncertain rather than as money already received.

Representations and warranties — The statements of fact a seller formally makes in a transaction document, which the buyer is entitled to rely on and can claim against if untrue.
Trade Sale — The sale of a private company to another company or to a financial buyer such as a private equity fund.
Earn-Out — A portion of a purchase price paid contingent on the acquired business achieving agreed performance targets after closing, rather than paid in full at the time of sale.

The headline sale price is not what investors receive — Proceeds from a sale flow through debt, transaction costs, preferences, escrow and earnouts before reaching each shareholder. The waterfall decides what a headline price is worth to you. (13 min)
Small shareholders mostly sign, but what they sign matters — An acquisition involves warranties, indemnities, escrow and a drag-along that can compel minority holders to participate. Understanding the documents before signing is the last chance to know what you are agreeing to. (11 min)
Proceeds arrive as a large, concentrated, taxable event — An exit converts an illiquid holding into money, tax obligations and a decision about what to do next. Planning before the money arrives usually produces better outcomes than reacting afterwards. (11 min)