In this 1 Minute Q&A, Todd Doherty, one of our M&A Experts answers the question: How can you spot a successful match between a buyer and seller?

Service Overview

How does Escrow work?

Using professionals who understand financial advisory practice transactions reduces the risk of fraud or non-payment by acting as a trusted third-party that collects, holds and only disburses funds when both the Buyer and Seller are satisfied. Our Partner law firm, Kotz Sangster Wysocki, P.C., has extensive experience in the financial services industry and will act as the Escrow Agent. Here is how it generally works when the Buyer is using bank financing (most common method) to purchase the practice:

•All parties agree to the terms of the transaction.
•The Buyer or Seller initiates the Escrow Account (for SBA loans, the Seller must initiate the Escrow Account).
•The Buyer (or bank) submits payment to the Escrow Agent by an approved payment method which is typically a wire transfer.
•Escrow Agent verifies the payment is in good order.
•The Seller is notified by the Escrow Agent that funds have been secured 'In Escrow'.
•The Seller transfers ownership of the financial advisory practice to the Buyer.
•Escrow Agent releases the agreed upon funds (generally the down payment) to the Seller from the Escrow Account. Timing of the release will depend upon the availability of the funds.
•The remaining funds are released to the Seller subject to the terms of the Escrow Agreement.
•If there is a conflict on how much and timing of the release of funds, the escrow agent will deliver the funds to the agreed upon court which has jurisdiction as agreed upon by the Buyer and Seller in the escrow agreement.

Key Areas Addressed

  • Continuity & Legacy Planning

Cost of This Service

Cost: $2,500 + percentage of deposit

The cost of an Escrow Account and the services provided by the Escrow Agent, is $2,500 plus a percentage of the amount deposited which is paid for by the Seller upon execution of the Escrow Agreement. The funds are held in the Escrow Agent’s IOLTA account with no interest being paid to either the buyer or seller.

Deposit <$1M $1-2M $2-3M $3M+
Example $500,000 $1,500,000 $2,500,000 $3,500,000
Percentage 0.16% 0.14% 0.12% 0.10%
Asset Fee $800 $2,100 $3,000 $3,500
Base Fee $2,500 $2,500 $2,500 $2,500
Total Fee $3,300 $4,600 $5,500 $6,000