Abstract

http://ssrn.com/abstract=2271394
 
 

References (8)



 


 



The Use of Escrow Contracts in Acquisition Agreements


Sanjai Bhagat


University of Colorado at Boulder - Department of Finance

Sandy Klasa


University of Arizona - Department of Finance

Lubomir P. Litov


University of Oklahoma - Michael F. Price College of Business; University of Pennsylvania - Wharton Financial Institutions Center

October 9, 2015


Abstract:     
A large fraction of acquisition deals for private firm and subsidiary targets include an escrow contract giving the bidder the opportunity to lay claim on escrow account funds if subsequent to the acquisition the seller fails to meet specific acquisition agreement terms. The likelihood of using an escrow contract is higher when buyer or seller transaction risk is larger. Also, the use of escrow contracts (i) helps to reduce bidders’ due diligence costs, (ii) enables sellers to obtain a higher sale price, and (iii) raises the extent to which an acquisition leads to an increase in bidder firm shareholder value.

Number of Pages in PDF File: 51

Keywords: mergers and acquisitions, escrow contracts, financial contracting

JEL Classification: G34


Open PDF in Browser Download This Paper

Date posted: May 29, 2013 ; Last revised: October 10, 2015

Suggested Citation

Bhagat, Sanjai and Klasa, Sandy and Litov, Lubomir P., The Use of Escrow Contracts in Acquisition Agreements (October 9, 2015). Available at SSRN: http://ssrn.com/abstract=2271394 or http://dx.doi.org/10.2139/ssrn.2271394

Contact Information

Sanjai Bhagat (Contact Author)
University of Colorado at Boulder - Department of Finance ( email )
Campus Box 419
Boulder, CO 80309
United States
303-492-7821 (Phone)
Sandy Klasa
University of Arizona - Department of Finance ( email )
McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-8761 (Phone)
Lubomir P. Litov
University of Oklahoma - Michael F. Price College of Business ( email )
307 West Brooks
Norman, OK 73019-4004
United States
University of Pennsylvania - Wharton Financial Institutions Center
2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States

Feedback to SSRN


Paper statistics
Abstract Views: 1,398
Downloads: 455
Download Rank: 44,784
References:  8

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.282 seconds