SRS EscrowExchange
Early Liquidity For Selling Shareholders
SRS EscrowExchange is a financial product designed to serve the liquidity and risk-mitigation needs of selling shareholders in M&A exits where a portion of merger consideration is tied up in escrow.
Shareholders of certain recently acquired companies now have the opportunity to sell their interests in the related escrows. Previously, shareholders were almost always forced to hold the illiquid asset until the escrow expired, prohibiting them from moving on, redeploying the funds, returning the capital to their limited partners, or otherwise accessing this money early for any reason. With SRS EscrowExchange, escrow holders can accelerate payments, lock in a value for their escrow position and avoid the risk of unpredictable losses that can result from indemnification claims against the escrow.
SRS has teamed up with SecondMarket, the leading marketplace for alternative investments, to facilitate SRS EscrowExchange transactions. Because private companies can have many shareholders, the SecondMarket platform allows all of those who are eligible to make an offer.
Why SRS EscrowExchange
Every shareholder is different. There are a variety of factors that may impact the decision to sell escrow interests. These include, but are not limited to:
Risk that payments are made that diminish the value of the escrow
Desire to redeploy the funds immediately
Ability to eliminate uncertainty surrounding the release amount and timing
Ability to close out an end of life fund
Ability to improve IRR by receiving money earlier
The Economic Decision
Assume a holder is receiving $90,000 at the closing of a merger and will have a $10,000 interest in an escrow. If that holder elects to participate in the auction and to offer $0.60 for each $1.00 in escrow interest, and if that offer is accepted, that holder will receive a total of $96,000 near the time of the closing of the merger. Alternatively, this holder could elect not to participate in the auction, in which case they will receive their up-front consideration on or near closing and their pro rata portion of whatever remains in the escrow at the end of the period. In this example, this could range from $0 to the full $10,000 depending on whether payments must be made that reduce the escrow balance. By purchasing interests in escrows, SRS EscrowExchange assumes this risk of uncertain future payouts.
SRS EscrowExchange LLC, an affiliate of Shareholder Representative Services LLC, only purchases small portions of certain escrows in which SRS is serving as the shareholder representative. For more information, please contact us today at escrowexchange@shareholderrep.com or 720.279.0973.