SAN FRANCISCO--(BUSINESS WIRE)--SRS | Shareholder Representative Services, the global expert in professionally managing post-closing matters in private company mergers and acquisitions, today announced its newest innovation, SRS EscrowExchange™, a financial product designed to serve the liquidity and risk-mitigation needs of selling shareholders.
Offered exclusively for transactions where SRS serves as shareholder representative, SRS EscrowExchange allows selling shareholders, including private equity and venture capital firms, to convert illiquid escrow holdings to cash. Available through SecondMarket’s next-generation trading platform, SRS EscrowExchange will allow stockholders to offer their interests for sale, enabling them to elect to lock in a value and avoid the risk of unpredictable losses that can result from claims against the escrow.
Escrows typically account for 10% to 20% of total merger consideration and the length of time cash is held in escrow generally ranges from one to two years. Before now, this portion of the consideration was always tied-up for the lifetime of the escrow, and the release of the escrow could be delayed well beyond the agreed upon date, due to unresolved claims.
“In 2007, SRS created the role of professional shareholder representative,” said Mark Vogel, Managing Director of Shareholder Representative Services. “We were the first to create proprietary technology for M&A post-closing deal management, the first to develop research studies for deal makers based on a distinct pool of transactions and extensive escrow data, and the first to create a manual of post-closing drafting tips for M&A counsel. Now with SRS EscrowExchange, SRS is the first to bring a new liquidity alternative for shareholders in private company sales.”
SRS has teamed up with SecondMarket, the leading marketplace for alternative investments, to facilitate SRS EscrowExchange transactions. On select transactions where SRS has been retained as the shareholder representative, selling shareholders can register on SecondMarket’s secure platform to verify eligibility, meet compliance requirements, set their offer price and agree to terms. Standard settlement procedures will be followed in each transaction.
“SRS EscrowExchange is a new liquidity product that enables stakeholders to efficiently obtain liquidity on their escrow holdings,” said Owen Dolan, Vice President at SecondMarket. “We are excited to provide the platform for this product, and collaborate with SRS, the market innovator in post-closing M&A services.”
“Venture capital exits generate $8 billion in escrow volume annually, while the average VC-deal escrow amounts to $19 million,” said Paul Koenig, Managing Director of SRS. “SRS EscrowExchange gives selling shareholders the alternative of avoiding holding these locked-up assets for an extended, and sometimes indeterminable, period of time. It’s an early liquidity option shareholders never had before.”
SRS EscrowExchange will be offered through SRS EscrowExchange LLC, an affiliate of Shareholder Representative Services. SRS EscrowExchange will take only a limited position in each escrow, so the stockholder group as a whole maintains majority interest.
SRS | Shareholder Representative Services is the global expert in professionally managing post-closing process to safeguard the selling shareholders’ interests in private company M&A transactions. As the shareholder representative, SRS manages all post-closing matters, including working capital and other purchase price adjustments, tax reviews, earnouts, the handling of claims, disputes and litigation, communications with acquirers and selling shareholders, and management and distribution of escrow and expense funds. On deals valued in aggregate in excess of $20 billion, SRS has represented more than 400 venture capital and private equity firms and over 25,000 shareholders in 44 countries. No one has as much knowledge and experience in serving as a shareholder representative and navigating the issues that arise post-closing than SRS. For more information, visit www.shareholderrep.com.
SecondMarket is the leading marketplace for alternative investments. It has become the online destination for accessing market data, building your investor network and transacting in assets such as private company stock, fixed income, public equity and bankruptcy claims. SecondMarket centralizes and simplifies secondary market activity by connecting buyers and sellers, and provides world-class market and operations expertise. SecondMarket has over 50,000 participants including global financial institutions, regional and community banks, hedge funds, private equity firms, mutual funds, corporations and other institutional and accredited investors. SecondMarket’s shareholders include FirstMark Capital, New Enterprise Associates (NEA), SVB Financial Group (Nasdaq: SIVB), the Li Ka-Shing Foundation and Dunearn, a subsidiary of (Singapore) Temasek Holdings. SecondMarket is a registered broker-dealer (Member FINRA, MSRB and SIPC) and is also registered as an Alternative Trading System. The company was selected as a 2011 Technology Pioneer by the World Economic Forum in Davos, Switzerland. For further information, please visit SecondMarket.com.