You’ve found a buyer, negotiated a deal, and now you’re ready to close. At the back of your mind is a niggling doubt: How can I close the acquisition securely? How do I know I’m not falling victim to a sophisticated scam? The answer is to use our escrow builder.
Escrow protects you and your acquisition counterparty from fraud. It’s a neutral, third-party service that helps you close securely, giving you peace of mind during those fraught final stages. Best of all, it’s free, and with our escrow builder, easier than ever to use.
First, you negotiate your deal structure on Acquire.com. Then you formalize it with the APA builder. Finally, you build your escrow transaction on-platform. Only when you’re both satisfied will you move to Escrow.com, ensuring you close without hiccups, delays, or restarts.
Why Should You Care About the Escrow Builder?
Think of escrow as an insurance policy against fraud. It could mean the difference between getting what you want and someone taking advantage.
On Acquire.com, your escrow service provider is Escrow.com, which has safely handled billions of dollars in transactions for millions of customers.
The escrow builder lets you set the details of your transaction before Escrow.com executes it.
In other words, the escrow builder ensures you transact what was agreed in your APA.
While we don’t insist on you using Escrow.com to close your acquisition, there are plenty of reasons you should, including:
- It’s safe, trusted, and free – we cover your escrow fee.
- You close complex deal structures on-platform, saving you time and minimizing risk.
- No need for multiple closing parties, leading to a smoother, easier acquisition.
- You get regular updates and communication at every stage of the process.
- Escrow.com can help resolve disputes as a neutral third party.
Imagine you’ve negotiated a complex deal structure including conditional payments (holdbacks). Maybe 15 percent of the purchase price is conditional on renewing a contract with a large client.
The escrow builder pulls these details from your APA for a final sign-off from both of you. You’ll review inspection periods, milestone payments (conditional payments), and an escrow summary (including purchase price breakdown) before sending the terms to Escrow.com.
Once your transaction starts, expect continuous communication throughout closing and beyond. We’ll update you at each step of the process through email and your acquisition dashboard. You’ll know at-a-glance the status of your acquisition, taking away the stress of uncertainty.
With your acquisition and escrow details finalized on-platform, you only use Escrow.com to close. And that’s how it should be. Errors or last-minute changes can arise after signing an APA. Now you can handle them easily without throwing a wrench into your timeline.
How the Escrow Builder Works
Below describes the escrow process end-to-end, starting with us and ending on Escrow.com. Emails and Acquire.com dashboard statuses keep you in the loop so you always know where you are in your acquisition transaction.
Agree to Escrow Details on Acquire.com
Escrow starts from your acquisition dashboard after you and your acquisition partner sign the APA.
1. Buyer Proposes Escrow Details
Click Start escrow from your dashboard to enter the escrow builder. Enter the email address you’d like to use (if you already have an Escrow.com account, use your Escrow.com email address) and then proceed through each page to verify the terms of the deal and update the inspection periods, if necessary (they default to 24 hours).
You’ll then reach the escrow summary. Check the purchase price breakdown. You’ll see the closing payment (less the Acquire.com closing fee of 4 percent of the purchase price) and any holdbacks or seller financing*.
Once you’re happy with the proposed details, click Send escrow details to forward your proposal to the seller.
*Currently, the escrow builder doesn’t create a seller financing agreement or repayment schedule, so you’ll follow the schedule in your APA if seller financing is included in the acquisition.
2. Seller Agrees to Escrow Details
When a buyer sends escrow details for your acquisition, we’ll notify you by email and dashboard status. Click View escrow details to enter the builder and review the escrow summary. Once you’re happy with the buyer’s proposal, click Accept.
You can also reject the buyer’s escrow details and enter a message explaining why. We’ll notify the buyer and they can send you updated details to accept. Otherwise, you both move on to the next step on Escrow.com.
3. Buyer and Seller Agree to Terms on Escrow.com
With escrow details finalized on-platform, click Agree to escrow terms to move to Escrow.com and create your transaction. You can’t change anything after this point unless you contact Escrow.com support (you won’t have to after steps 1 and 2).
Close Your Acquisition on Escrow.com
The escrow builder includes support for milestone payments on Escrow.com with emails confirming each step of the closing process. Whether approving assets, requesting milestone payments, or inspecting holdback conditions, you’ll know what to do and when.
4. Buyer Sends Acquisition Funds to Escrow.com
First, the buyer sends the funds to Escrow.com. This includes the closing payment, holdbacks, and other conditional payments but not seller financing. Escrow.com will make conditional payments when the buyer confirms the seller has satisfied the condition.
5. Seller Sends Acquisition Assets
Once Escrow.com verifies the buyer’s funds, the seller will receive an email and dashboard status update asking them to transfer the acquisition assets.
6. Buyer Approves Acquisition Assets
The buyer has until the end of the inspection period to review and then accept or reject the assets. If Escrow.com doesn’t hear from the buyer before then, it’ll release the buyer’s closing payment to the seller. You can ask Escrow.com to help resolve any dispute.
7. Escrow.com Releases Closing Payment
The seller will receive the buyer’s closing payment, minus the Acquire.com closing fee of 4 percent of the purchase price, once the buyer approves the assets.
8. Seller Meets Holdback Milestone Condition
The closing payment rarely concludes an acquisition. Usually, the purchase price includes seller financing and conditional payments. Since the escrow builder doesn’t include the seller financing repayment schedule, please refer to the APA.
However, the escrow builder does support conditional (milestone) payments. When sellers meet a condition, they request a milestone payment through their acquisition dashboard, which will prompt the buyer to review and approve the payment.
9. Buyer Approves Milestone Condition
Buyers receive an email and dashboard status update when a seller requests a milestone (conditional) payment. They can approve or reject this payment through the escrow builder, and again, Escrow.com can help resolve disputes should they arise.
10. Escrow.com Releases Milestone Payment
If the seller has met the condition for the milestone payment (if they’ve completed 12 months of transition services as stated in a holdback, for example), the buyer approves the payment and Escrow.com releases it to the seller.
Steps 8, 9, and 10 will repeat for however many conditional payments are included in your APA. If the buyer doesn’t respond to the approval request within the inspection period, Escrow.com will release their payment to the seller.
Throughout each step, buyers and sellers receive emails, status updates, and reminders to ensure you close smoothly.
What Happens If You Don’t Use Escrow.com?
You don’t need to use Escrow.com. You can use your own escrow agent or not bother with escrow at all, though we don’t recommend it. Steps 1-3 remain the same if you don’t use Escrow.com, but none of steps 4-10 will apply since we’re not part of your escrow process.
If you use your own escrow agent, the APA builder will ask you to enter their contact information so we can send them a copy of your APA to get the ball rolling. Otherwise, mark the startup acquired when escrow completes.
While you’ll always have the option of using your own escrow service (or none at all), we recommend using Escrow.com in all but the most complex of deals.
The escrow builder is one of many new technologies we’re building to make buying and selling businesses easy on Acquire.com. Drop us a line at support@acquire.com with your thoughts and feedback to make it even better.
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before entering into any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.
