How the SPA Indemnity Holdback Traps Sellers in M&A

Lucas and Luna break down one of the most overlooked clauses in a middle-market acquisition: the SPA indemnity holdback. Using a real-world case of a $50 million industrial distributor sale, they explain how a 15% holdback — meant to cover post-close breaches — became a leverage weapon for the buyer. They walk through the negotiation trap: standard language holds 10-20% of the purchase price in escrow for 12-24 months, with no interest accruing to the seller. Lucas shares how one seller lost $2.1 million in working capital adjustments and indemnity claims, plus another $400,000 in legal fees fighting them. They contrast this with a clean exit where the seller capped the holdback at 5% and shifted to a survival-only escrow. The episode ends with three concrete defences: time-cap the survival period, define exclusive remedies, and require materiality scrapes on all claims. A practical episode for any founder or operator preparing to sell. #SPA #IndemnityHoldback #MergersAndAcquisitions #MiddleMarket #Escrow #SellersRights #WorkingCapitalAdjustments #PostClose #Negotiation #DealStructure #Leverage #BusinessSale #Acquisition #Founders #Operators #Business #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo