Escrow / holdback

Escrow / holdback — a slice of the purchase price (commonly 10–20%) held by a third party in escrow, or simply not yet paid, for 6–18 months after closing, against which breaches of the seller’s warranties are offset. In a jurisdiction where suing a disappeared seller is a multi-year project, the holdback is not deal decoration — it is the only self-enforcing warranty. A seller note does the same work automatically: installments still owed are leverage still held.

First used in: 4.3 · PH due diligence: acquisition II