How escrow and paying agent solutions can save your next M&A deal

For M&A lawyers navigating complex structures, currency requirements, regulatory hurdles, and emotionally charged negotiations, precision isn’t a luxury, it’s a lifeline. Yet, even the best-crafted deal can unravel if the mechanics of payment and fund distribution go wrong.

That’s where escrow and paying agent solutions come into play. Far more than administrative conveniences, they are strategic safeguards that ensure funds are protected, payments are precise, and everyone sleeps better at night. But let’s take a step back and see what happens when these safeguards aren’t in place.

Common pitfalls when escrow and paying agents aren’t used

Delays caused by international wire transfers

One example of payment delays is the use of wire transfers. Imagine the terms of a deal were agreed, due diligence has been completed, and lawyers on both sides are preparing to celebrate…until the buyer’s payment is delayed due to a cross-border wire transfer error.

Without a payment agent, there is no neutral party holding funds and no mechanism to resolve the discrepancy quickly.

Having an FCA authorised payment services firm as the payment agent appointed to receive and hold funds ahead of closing would mean issues with wire transfers can be avoided.

Risk of distributing funds to multiple shareholders without support

Another example of when escrow and paying agent solutions can mean the difference between success and failure is where a buyer’s legal team have assumed responsibility for distributing funds to large numbers of individual shareholders including international investors.

The risks associated with shareholders bank accounts being incorrect, shareholders believing they’re owed more than they’re receiving – or even a shareholder having passed away unbeknownst to the buyer – can lead to lengthy processes and even the reissuing of payments.

An additional risk is that a solicitors’ own payment platform may not be set up to administer a large volume of payments, therefore placing a firm in a vulnerable position if trying to handle these themselves should any errors be made in what will be a time consuming and often manual process for them.

With a professional paying agent, that can assume responsibility for any payment issues at completion, transactions can be managed efficiently behind the scenes.

How escrow and paying agent services can save a deal

Escrow services

Escrow agents act as neutral third parties holding funds or assets until predefined conditions are met. In M&A, this typically involves:

• Holding funds to cover post-closing liabilities.
• Acting as a buffer to prevent miscommunication or last-minute cold feet.

An escrow structure also adds legal clarity and reduces risk, especially in multi-jurisdictional deals with different banking systems and regulatory regimes.

Paying agent services

Paying agents are tasked with the accurate, timely and secure distribution of sale proceeds to shareholders.

Key advantages include:

• End-to-end handling of shareholder payments, tax withholdings, and reporting.
• Screening payments, which is especially important with cross-border or institutional investors.
• Reporting for compliance and transparency.

They eliminate clients from manual processes, reduce risk of error, and offer a clean, professional experience for all stakeholders which is particularly critical when seller groups are large or diverse.

The role of M&A lawyers

M&A lawyers do far more than just structuring and drafting share purchase agreements, they orchestrate the entire transaction.

By integrating escrow and paying agent solutions into workflows, client risk is reduced, timelines are streamlined – reducing costly delays and disputes – and reputations are intact.

How ZEDRA can help

Not all escrow and paying agent providers are created equal. M&A lawyers need a reputable partner, offering the security of regulatory safeguards, who understands the nuances of different deals, can move fast and scale and adapt to varying levels of complexity.

In today’s M&A landscape, escrow and paying agent solutions aren’t optional extras. They’re essential infrastructure and the ‘best friend’ a lawyer could ask for when it comes to getting the deal done right.

At ZEDRA, our UK based team of experts have extensive experience providing escrow and paying agent solutions to both corporate and private clients across a wide variety of sectors.

Whatever the transaction, our clients turn to us to provide timely, efficient escrow and paying agent solutions for transactions of all sizes, including short term to indefinite escrow arrangements.

For more information on ZEDRA’s escrow and paying agent solutions, contact Sue Wakefield.

Escrow services are provided by Zedra Trust Company (UK) Limited authorised and regulated by the Financial Conduct Authority, including for the provision of payment services as an Authorised Payment Institution.