DEAL STRUCTURE
Escrow and holdbacks: the part of the price you wait for
An escrow or holdback is part of the purchase price set aside at closing to cover claims the buyer may make later, such as a breach of a representation or a working capital shortfall. In SRS Acquiom's data for 2025 deals, the median for all escrows was 10 percent of transaction value in deals without representations and warranties insurance, and 2.8 percent in deals with it. Size, duration, and release terms are all negotiable.
By Akim Guennani, Founder · Updated October 2026
10.0%
Median of all escrows as share of deal value, 2025 deals without R&W insurance
2.8%
Median of all escrows as share of deal value, 2025 deals with R&W insurance
~2/3
Share of reported deals with an indemnity escrow, ABA deal points studies
Escrow vs. holdback
An escrow is held by a third-party escrow agent under an agreement between buyer and seller. A holdback is simply kept by the buyer until the release date. An escrow gives you more protection, because the buyer cannot use the money for anything else.
- Indemnity escrow
- Covers claims for breaches of representations, warranties, and covenants, typically for 12 to 24 months.
- Adjustment escrow
- Covers post-closing adjustments such as working capital, and is usually released within a few months.
- Special escrow
- Covers a specific known issue, for example a payer audit or recoupment found in diligence.
How R&W insurance changes the math
Representations and warranties insurance shifts much of the indemnity risk from the seller to an insurer, which is why escrows are so much smaller in insured deals. RWI is more common in larger transactions because of premium and retention costs, but it is worth asking any buyer whether it plans to use it.
In healthcare deals, insurers often exclude known issues and some regulatory risks, so even with RWI, a buyer may ask for a special escrow for items found in diligence.
Getting your money back
Most escrows are released in full on schedule. To improve your odds, negotiate a clear claims process with deadlines, a cap on what can be claimed, and partial releases over time. Clean diligence, accurate disclosure schedules, and a reconciled working capital calculation reduce the claims that delay releases.
What is market
SRS Acquiom's 2026 Deal Terms Study, covering more than 2,300 private-target acquisitions, found that in 2025 deals without representations and warranties insurance, all escrows averaged 12.1 percent of transaction value with a median of 10.0 percent. In deals with RWI, the average was 5.1 percent and the median 2.8 percent.
The ABA's private target deal points studies show indemnity escrows in roughly two-thirds or more of reported transactions, and lower escrow amounts where RWI was referenced.
Illustrative example: cash at closing
Assume a $10,000,000 sale without R&W insurance and a 10 percent escrow. You receive $9,000,000 at closing, before debt payoff, fees, and taxes, and $1,000,000 sits in escrow. If the escrow releases half at 12 months and the rest at 18 months with no claims, you receive $500,000 at each date. The figures are hypothetical.
Escrow terms checklist
Negotiate these points before the purchase agreement is final.
Owner checklist
- Escrow size and whether it is the buyer's only source of recovery
- Duration and partial release dates
- A claims process with notice requirements and deadlines
- Separate, short-lived adjustment escrow for working capital
- Special escrows sized to specific known issues only
- Who earns interest on the escrowed funds
How Lartico fits in
When several buyers are interested, escrow size and terms become part of the competition, not just the price. Lartico introduces you to multiple qualified buyers so you can compare full terms, not just headline numbers.
Sources and methodology
Public transactions provide market context, not a valuation quote for a private practice. Illustrative examples use hypothetical assumptions and are not predictions. This guide is educational and is not legal, tax, accounting, or investment advice.
- 1. SRS Acquiom 2026 M&A Deal Terms Study highlights (DealLawyers.com). Average and median escrows for 2025 deals with and without R&W insurance.
- 2. What's market: indemnity escrows (Goulston & Storrs). Summary of ABA private target deal points studies on escrow prevalence and RWI.
- 3. M&A Deal Terms Study (SRS Acquiom). Underlying dataset of 2,300+ private-target acquisitions closed 2020 to 2025.
Reviewed October 2026
Questions owners ask
Straight answers, before you commit to anything.
How much of the price is usually held in escrow?+
In SRS Acquiom's data for 2025 deals, the median for all escrows was 10 percent of transaction value without R&W insurance and 2.8 percent with it.
How long does an indemnity escrow last?+
Commonly 12 to 24 months, depending on what was negotiated and whether R&W insurance is in place.
What is the difference between an escrow and a holdback?+
An escrow is held by an independent agent; a holdback is kept by the buyer. An escrow gives the seller more protection.
Can I avoid an escrow entirely?+
Sometimes, in deals with R&W insurance and limited seller indemnification. More often the goal is a smaller escrow with clear release terms.
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