Sold my 22-person landscaping company last year. We closed in March, and the buyer held back 12% in escrow for 18 months. Sounded fine on paper, but the last year has been a slow bleed of arguing over working capital adjustments and a customer who disputed a prepaid contract. I thought the hard part was over at closing. It wasn't. Any other owners here been through this? What actually helped you get the money released without burning the relationship or hiring a lawyer?
Escrow
Real owner advice on surviving post-closing escrow holdbacks
Documentation. Boring, but that's the answer. I sold a commercial cleaning outfit in 2019 with a 15% holdback. The buyer tried to claim two lost accounts as breaches. I had the original service contracts, the client emails from the transition period, and a signed note from the account manager. Sent it all in one email and got the release in nine days. Most buyers aren't trying to steal the money, they're just protecting themselves. Make it hard for them to justify keeping it.
Who holds the escrow? Is it a third-party agent or is it sitting with the buyer's attorney?
Third-party escrow agent, thankfully. But the release instructions still require the buyer's signature, so the agent won't move without him.
That's a common setup and it's exactly why the holdback has all the leverage. I've been on both wides. What I'd do before you spend anything on a lawyer: get the escrow agent to state in wriiting the exact conditions required for release. Sometimes the purchase agreement is vague and the agent is just reading the strictest interpretation. Two sentences from the agent clarifying the process can save you a month of guessing.
Also, why 18 months? Were there earnout milestones tied into it, or was that just the buyer's ask?
Mostly the buyer's ask. There were two small earnout thresholds in the first six months, but the bulk of it was just a straight holdback for reps and warranties. Six months in, they already released the earnout portion without drama. The remaining piece is the working capital true-up and that one disputed contract.
The working capital true-up is where these things go to die. I was an office manager for a small manufacturing company when it was sold. The buyer's accounting firm and the seller's accounting firm both took positions and neither moved for four months. It only resolved when someone realized the difference was one truckload of inventory that had been pre-sold. Nobody was acting in bad faith, the definitions were just loose.
How much is left in escrow? Because that changes thhe math. If it's a small amount, a lawyer will eat it. If it's significant, a letter from your M&A attorney usually costs a fraction of what's being withheld and moves things fast.
Low six figures. Enough that I don't want to walk away from it, not enough that I want to spend half on legal fees. That's the trap.
If the disputed contract is the buyer's customer now, leaving them to chase a difficult client while you argue over a smaller number might get it resolved faster than any letter. I did that with a government contract that got messy. Once the buyer's team had to deal with the client, the dispute over who bore the risk dissolved out of frustration with the client rather than a legal argument.
That's actually closer to what I'm leaning toward. The client is in our world and the buyer has had to manage them for months now without us holding their hand. I'm going to ask the escrow agent for the release conditions in writing and then make one clean package with the contracts and the working capital calculation. If that doesn't move it, I'll revisit the lawyer question. Appreciate the reality checks.