Too often, corporate treasury professionals are brought tothe table late in merger and acquisition (M&A) transactions.While parties to the deal are focused on tense negotiations, thetreasurer may remain mostly off the radar. Then he or she mayfinally be brought into the loop near the end of the discussions,at which point the treasury team has insufficient time for planningthe post-merger transition.

However, one key area in which treasury can plan adequately inadvance and from a distance is M&A escrows. Typically relegatedto the back burner in the midst of a transaction, escrows haveincreasingly become a point of focus among treasurers given newregulatory changes and emerging investment options.

M&A escrow accounts are formed to hold a portion of theagreed-upon purchase price in escrow as protection against certainpotential losses. For example, if the selling company misrepresentssome fact about its business, or if it fails to perform a requiredtask prior to closing, the buyer could regain any losses by makinga claim against the escrow account rather than filing a lawsuitagainst the acquired company's former shareholders. The duration ofa typical M&A escrow is 12 to 24 months. In some cases, thatterm is extended if indemnification claims are made under themerger or acquisition agreement.