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after the closing of the transaction the seller may have certain post closing obligations these may include purchase price adjustments payable to the buyer and potential indemnification claims so a buyer in an M&A transaction generally requires a portion of the purchase price to be held back until a later date in the circumstances listed here the buyer has concerns about the sellers ability to pay its post closing obligations the buyer may not be certain that the sellers creditworthiness will hold up until the liability comes to you or the buyer may not trust the seller to actually pay the liability when you without the threat and distraction of litigation over the term of the indemnity if the seller does not pay under the indemnity then the buyer would be stuck in the middle required to pay the liability to the third party creditor or suffer the loss but unable to recover under the indemnity from the seller there may also be a case where there are multiple sellers in such a case the buyers may want an escrow to ease the burden of having to track down each seller when claims arise then again the buyer may wish to streamline the process of obtaining amounts for post closing obligations Sallis typically prefer that these hell back amounts be placed into escrow with a third-party escrow agent rather than Ming retained by the buyer if a transaction has an earn outs then the buyer may also bargain for the rights to offset future or not payments if any indemnity payment is owed in these cases the pressure to have an escrow is reduced the bodies will have to agree on whether the offset right applies if an indemnity payment is being disputed in good faith to establish the escrow the parties enter into an escrow agreement with an escrow agent the agreement sets out the terms and conditions under which the escrow agent holes and distributes the escrowed fund you may see a sample of escrow agreement as a supplement to this course in most M&A transactions the escrow agent is a bank or a financial institution that often has its own set of standard terms and conditions for the escrow agreement in some cases the escrow agent may want to use its own form of escrow grim issues and delays may arise if any of the escrow agents standard terms and conditions or form of the escrow agreement conflict with the terms and conditions negotiated between the buyer and seller well as such there are no laws as to who can be an escrow agent or what are the qualifications to become one as such anyone can become an escrow agent I have seen a partner of a law firm becoming an escrow agent for keeping the papers in a safe custody often this stems from the trust level that a person has with the buyer and seller however when some consideration has some monetary value typically a...