You can read all of our articles on our website. Having trouble getting our emails?   Change your spam controls and white list 

Upping the holdback in a sale as the new norm / register for webinars now

May 30, 2020
Title:  What do sellers need to look for in the buy-sell transaction
When:  June 2, 2020 12 PM EST.
Presented by:  Ken Kirschenbaum,Esq.  Guest panelists:  Victor Harding, Mitch Reitman, Rory Russell, Dennis Stern,Esq
Who should attend:  Alarm owners for sale or thinking of selling
Register here:
Title:  selling and installing thermal imaging cameras and liability exposure
When:  June 4, 2020 12 PM EST.
Presented by:  Ken Kirschenbaum,Esq.  Guest panelists: Barry Levine, Pres of Sperry West
Who should attend:  owners, managers, sales people

Upping the holdback in a sale as the new norm   
            A comment was made in the webinar [] we did on that holdbacks were now 15/20% due to the issues of the virus. No one commented, however, if that is done on a case by case basis if there is an indication of an increase in the seller's cancellations or more importantly how much of an increase; if a seller has a 6/7% normal cancellation rate, a 2% increase would still be deemed good as it still would be below the industry accepted standard of 10/12% for a "good" company; so why have an additional adjustment? 
            In any case, even if the higher adjustment is warranted, shouldn't the holdback provision allow a look back in 6 months (presuming it is the standard one year holdback) to see if any "virus affect" has ameliorated and if so part of the holdback amount would be returned to the seller?  Similar approach and 6 month review would be applicable if it is an integrator sale which is based on a multiple of EBITDA.  I don't think one should agree to an increase in the holdback (and 10% is a substantial increase) just because of the "virus".  It should be based on what the actual impact of the "virus" was on the seller's business and then adjusted at the end of 6 months if the situation has improved.
Dennis Stern,Esq
Kirschenbaum & Kirschenbaum
            This may be a good time to review the concept of the holdback.  I think the industry needs some clarity on this topic.  I am considering a webinar on this topic.  Let me know if you want to participate.
            The parties in a buy-sell transaction sometimes confuse the holdback with the guarantee.  I saw one deal by some hot shot lawyer in New York who bragged to me that he had done over 12 deals, where the agreement didn't even mention a guarantee or a holdback.  It was simply a Note that got adjusted after a period of time.
            The buy-sell transaction customarily has a guarantee period.  The seller guarantees the account attrition for a period of time.  If the purchase price is based on a market multiple then expect a one year guarantee.  
            The holdback collateralizes the guarantee, and sometimes the guarantee is limited to the holdback and sometimes it isn't.
            All of these deals have their own nuances and terms.  Every once in a while someone asks me for a "contract form" for a deal, apparently not understanding that the "deal" is needed to make the "contract form", not the other way around.  It's an interesting distinction in an industry where you are advised to get the "form contract" and use it; conform your business to the contract, if it's one of the Standard Form Agreements.  But for the Asset Purchase Agreement or the Stock Purchase Agreement we should start with the terms of the deal.  Sure there are standard boiler plate terms, but these are useless without the meat of the deal.
            What can we expect from the coronavirus and its effect on alarm buy-sell transactions?  Probably nothing good, that's for sure.  The guarantee is not likely going away.  It has to be collateralized, so the holdback isn't going away either.  I don't think you need to be a fortune teller to believe that attrition is likely to be higher this year and maybe longer.  Either the multiple has to drop or the guarantee and holdback need to be longer and higher.
            When a typical seller sells that's usually the end of a career; it's almost always the end of wanting the hassle of the alarm business.  No seller wants to be hanging around to watch how the buyer does with the business; "best of luck and all that; send my check to this address".  A smart seller will have a pretty good idea whether he's going to see any part of the holdback, or whether he expects the guarantee to well exceed the holdback.  This is a seller's risk, and that risk needs to be understood and managed at the time of the transaction, not later when the seller really wants no part of the alarm business which isn't even his anymore.  A seller doesn't want to have to pay for buyer mistakes, and that too needs to be carefully provided for at the contract stage.

To order up to date Standard Form Alarm /  Security / Fire and related Agreements, click here:
You can check out the program and sign up here: or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304.
NOTICE:  You can always read our Articles on our website at
THE ALARM EXCHANGEalarm classifieds alarm security contracts

    This area is reserved for alarm classifieds, alarm company announcements, solicitations, offers, etc. 
    There is no charge to post a listing here.Include your contact information, phone, email and web site.  If you would like to submit a post, please send an email to  To create a reciprocal link to our website, click here.

Getting on our Email List / Email Articles archived: 
    Many of you are forwarding these emails to friends or asking that others be added to the list.  Sign up for our daily newsletter here: Sign Up.  You can read articles and order alarm contracts on our web site
Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301