The paying agent should be able to offer a wide range of services in order to facilitate the closure process and minimize the number of claimants required. Use your negotiation capital for things like improving service levels or rushing processing to meet tight deadlines. In the past, the parties to the transaction have hired a traditional financial institution to act as a paying agent with a very limited range of services. Now there are new and innovative participants in the market (including payment administrators) and you have more choices with some providers offering a platform for additional services such as online solicitation, signatures and aggregation of shareholder documents, facilitation of tendering processes, creation of one or more escrow accounts with online access to balances, insurance representations and guarantees (RWI) brokerage. Credit agency services, shareholder representation services and expenditure fund management, among others. Tim Martin, Senior Director of Escrow Administration and Payments, advises “leveraging the use of a single vendor for your M&A close and post-closing management to keep the process efficient and reduce costs. » – Pro Tip: Choose the appropriate form of paying agent agreement A paying agent must provide a simple platform that allows beneficiaries to: get their money quickly. For example, they must ensure that the paying agent provides the best customer service, uses an easy-to-use method to request and collect LOT, and is committed to making payments quickly and accurately. The more efficient the process is for beneficiaries, the better the buyer will examine VIP beneficiaries such as executives, private equity funds, venture capital firms, institutional investors, family offices and high net worth individuals. First of all, ask the paying agency for the current form of paying agent contract.
Paying agencies often update their forms to better position themselves competitively and reflect regulatory changes, and it may be useful to take advantage of these updates. The selected form must adequately cover the topics listed above. Either way, as Tim Martin, Senior Director and Relationship Manager at SRSÂ Acquiom, recommends, “A sophisticated paying agent may consider the preferred form of the buyer`s paying agent contract and work with the buyer`s lawyer to ensure it is suitable for the specific transaction. Leverage the paying agent`s expertise and experience to get details such as payment mechanisms and focus your negotiations on getting the best and most comprehensive suite of services from your paying agent. The result will be a transparent closing process that guarantees fast and efficient payments, a smooth and successful transaction, as well as satisfied customers and VIP beneficiaries. Make a list of what you want the paying agent to do to streamline the payment process and completion in general. Consider things like: First, make sure the paying agent agreement covers all post-closing payment events, including purchase price adjustments, trust releases (including the possibility of multiple escrow account releases if there are claims), earnout and milestone payments, conditional compensation payments, tax refunds, distribution of expense fund amounts and any other possible future payments that may occur. Avoid additional installation costs (and negotiate a separate paying agent contract or a change to the existing one) by planning ahead and setting reminders for known dates of future payment events. Beneficiaries and sellers will appreciate the ease and consistency, and the buyer will appreciate not getting stuck with the hassle of payments after completion. Second, consider other services such as tax reporting and withholding tax, finding beneficiaries with outdated contact information, tracking recipients who don`t respond, managing abuses, and answering questions from expected beneficiaries about the amounts and timing of future payments. Paying agencies can bring significant value to the process by providing such services and the parties should confirm that all services requested are explicitly covered either in the paying agent contract itself or in the fee schedule that generally accompanies them.
The wording of tax matters in the form of a paying agent agreement is usually formulated by your tax advisor in such a way that it deliberately contains specific wording. This tax wording is often as widely applicable as possible, so it can cover very different transactions with little or no change. While some tax provisions do not apply to your particular business, the wording is likely to be worded in such a way that any unenforceable provisions can be ignored. Changes to the language of the tax file form can lead to delays in negotiating the agreement, as the paying agent often has to forward the tax wording to its legal and/or tax staff and possibly to an external tax advisor (with additional costs for the business parties). To shorten this process, ask your tax advisor to make only the necessary changes to the tax wording of the agreement, rather than making more comprehensive changes that adapt and adapt the tax section to your particular business, but may not be strictly necessary. Focus your negotiation efforts on all truly company-specific tax issues such as dividends, interest, sale of corporate interests, compensation payments, IRS §1446, and other “different” categories. The instructions contained in the LOT are crucial to the beneficiary`s experience. Providing complete and useful information and instructions in plain language ensures that expectations are set appropriately, that LTTs are submitted correctly, and that recipients are paid earlier. Drew Wassing, Senior Director of Global Payments and Receiver Administration Services at SRSÂ Acquiom, suggests: “Check what options the paying agent offers to request and collect LOT and choose the one that best suits your business and is best for beneficiaries. Buyers and their advisors are too often distracted by details such as payment mechanisms instead of getting the most out of the paying agent.
An experienced paying agent should facilitate the work of both the buyer and the buyer while ensuring a first-class experience for beneficiaries. Based on the over $220 billion in payments processed by SRSÂ Acquiom to date, this article highlights five areas where it is possible to save time and avoid headaches when negotiating paying agent agreements. A good paying agent will communicate clearly and proactively about what information they need and when they need it. According to the agreement, there are usually three categories: the paying agent tells the buyer what information is required and how detailed it should be when filling in the documentation. For example, does the buyer really have to provide projected sales figures? Aaron Soper, Senior Director of Escrow and Payments Administration at SRSÂ Acquiom, confirms that “revenue areas may be sufficient. Another example: If the agent in charge of the buyer does not wish to provide their Social Security number on a form or by email, Aaron suggests “asking the paying agent if the agent can provide it over the phone directly to the paying agent`s compliance representative.” A helpful paying agent should guide you through all the requirements of the buyer and the buyer`s advisor, either by specifying that the buyer`s advisor refers to the buyer, or by working directly with the buyer`s financial or accounting staff. Pro Tip: Find out what else the paying agent can do for the parties to the transaction Pro Tip: Determine tax characterizations early in the process An avoidable trap in conclusion is the last-minute effort to determine the tax characterizations and required withholding tax amounts. For example, some withholding tax applies to non-U.S. citizens. Beneficiaries are legally required to be made at the time of payment. If the financial statements are close to the tax reporting deadline, there may not be enough time to make these decisions after closing.
Finally, once a transaction is completed, the priorities of the company`s tax and accounting staff are likely to shift from these tax issues to post-closing integration. Ali Arend, relationship manager for SRS Acquiom`s global M&A payment and receiver administration services, suggests “minimizing delays and last-minute fire drills, starting work on the final payment table with beneficiary information, tax characterizations, and withholding tax amounts as soon as possible.” .
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