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Escrow Holdback
A portion of the purchase price that is held in escrow after closing to cover potential indemnification claims or adjustments.
Implications
A portion of the purchase price in a transaction that is held back in escrow to cover potential future liabilities, such as indemnities or claims, often used in mergers and acquisitions to protect the buyer from unforeseen risks.
Example
Example: In a merger agreement, the buyer includes an escrow holdback clause that withholds 10% of the purchase price for one year to cover any potential breaches of warranties or pending legal issues.
Related Terms
Different from a full escrow account, which holds funds until all conditions are met, a holdback specifically retains a portion of funds to address potential future contingencies.
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