Escrow Account
An account where a portion of the purchase price is held until certain conditions are met, used to protect both buyer and seller in an M&A transaction.
Implications
A financial arrangement where a third party holds funds or assets on behalf of two other parties involved in a transaction, releasing them only when certain conditions are met, commonly used in real estate, mergers and acquisitions, and online transactions to ensure security and trust.
Example
Example: During a business acquisition, the buyer places a portion of the purchase price in an escrow account, to be released to the seller only after all contractual conditions, such as regulatory approvals, are satisfied.
Related Terms
Different from a standard account, an escrow account is specifically designed to hold funds securely until agreed-upon conditions are met, protecting both parties in a transaction.
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