Escrow Agreement

A contractual arrangement whereby one party to a transaction transfers assets (including cash) to a third party (an escrow agent) pending completion of the transaction’s terms is an escrow agreement. The escrow agent will hold the asset pending completion of all of the conditions of the contract. They’re useful in a business context because they offer a high level of assurance that the other side of a transaction will deliver on contractual promises before money is disbursed to the business counterparty. In M&A, an escrow agreement might, for example, see the buyer deposit the funds for the acquisition with an escrow agent via an escrow agreement. These funds will be held until the seller has completed all contractually agreed deal terms.