Dr Allen Nazeri DDS MBAHealthcare M&A Expert

Handling Deposits in M&A: What Sellers and Buyers Need to Know | PRIME exits™

28 May 2025 · 2 min

Watch on YouTube

2:29

A PRIME exits YouTube presentation (May 28, 2025) by Dr Allen Nazeri explaining deposits in M&A: definition, purpose (signal commitment/compensate opportunity cost), typical amounts (smaller deals: 2–10%; mid-market: 1–3% often capped at $1–2M), timing (usually on signing LOI or after milestones), refundable vs non-refundable situations, escrow custody, and alternatives (shorter exclusivity, milestone agreements). The video offers practical guidance for buyers and sellers and includes a CTA for PRIME exits advisory services.

Questions this video answers

Dr Allen Nazeri DDS MBA (PRIME exits).

May 28, 2025.

Under $100 million.

2% to 10% of the purchase price.

About 1% to 3%, often capped at $1 million to $2 million.

Chapters

Foreign.
Welcome business professionals. Today I'm breaking down a key topic in mergers and acquisitions. Deposits in M and A. A deposit is an upfront payment by the buyer to show commitment during the exclusivity or due diligence period. It's like putting some skin in the game for smaller deals. Think under $100 million deposits are common. Strategic buyers and private equity groups might resist unless the seller has leverage. But why are deposits requested? Sellers need to weed out serious buyers from window shoppers. A deposit signals financial readiness and compensates for the opportunity cost of taking the business off the market. So how much should the deposit be? For smaller deals it's typically 2% to 10% of the purchase price. For mid market deals it's about 1% to 3%, often capped at $1 million to $2 million. When is the deposit paid? Usually upon signing a letter of intent and before exclusivity kicks in. In some cases it's delayed until milestones like financial diligence completion or buyer board approval. Refundable versus Non Refundable Deposits Refundable deposits are common if the buyer finds material issues during diligence. Non refundable deposits, often in competitive or distressed sales, should be approached with caution. Deposits should always be held by a third party escrow agent to ensure neutrality. This protects both parties if disputes arise. Now. If deposits aren't feasible, alternatives like shorter exclusivity periods or milestone based agreements can also ensure commitment. Buyers offering a deposit can make you stand out, but ensure you've done some preliminary diligence. Sellers deposits provide peace of mind, but structured timelines can also keep the deal on track. Remember, handling deposits is crucial for driving accountability and reducing deal risk. With the right approach, you can pave the way for a smoother M and A process. Looking for help structuring your next deal? Reach out to us at Prime Exits for expert advice. See you next time. Don't forget to like subscribe and hit the bell icon to stay updated. Updated with prime exit's M&A advisory. For more insights and expert advice on healthcare, M and A and for a free valuation of your company, contact us today. Valuationsexits.com.