Holdback Agreement
An agreement where a portion of the purchase price is withheld for a period after the transaction closes, often to ensure certain conditions are met.
Implications
A contractual provision where part of the payment in a transaction is withheld until certain conditions are met, often used in mergers and acquisitions, real estate, and other financial deals to ensure that all parties fulfill their obligations.
Example
Example: In a business acquisition, the buyer and seller agree to a holdback agreement where 10% of the purchase price is withheld until the seller meets specific performance targets, ensuring that the transaction�s terms are fully met.
Related Terms
Different from a full payment at closing, a holdback agreement introduces a delay in payment contingent on the fulfillment of certain conditions, providing a safeguard for the paying party.
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