Citizen Media Watch

april 13th, 2021

Tsa Transition Services Agreement

Posted by lotta

A Transitional Service Agreement (TSA) is an agreement between buyers and sellers, under which the seller concludes his services and know-how with the buyer for a certain period of time, in order to support and allow the buyer his new assets, infrastructure, systems, etc. The comments and questions that follow make it better to ”do things you need to do yourself,” not ”that`s what they need to do to have a successful ASD” – in addition to the fact that all participants should be communicated to each other and that the agreement should be very detailed. Okay, that`s all, right? But as with any legal agreement, their quality depends on the effort you make. And as the TSA becomes an important transition project document, it pays to invest enough time in planning the TSA, taking into account the assessment of buyer requirements. The buyer`s main task at the beginning of the transaction is to evaluate the seller`s responses to the requests described above (through an initial meeting with the seller and due diligence questionnaires) so that the buyer has a better sense of the systems and services used to carry out the target transaction. The buyer should use this information to identify potential overlaps and gaps in their own capabilities and systems. In the event of overlap, the buyer must determine which overlapping item should be retained after the closure. In the event of deficiencies, the buyer should identify how to deal with insufficient or missing systems or services. For example, the buyer`s current systems and services, TSA services or newly purchased systems or services. In addition, the buyer should think about how the systems and services of the target company and the seller connect to its own technology sourcing model.

Incompatibilities with the buyer`s current systems should be identified and analysed at an early stage in order to identify other agreements. The buyer should also evaluate the call options for the target transaction when the TSA ends. Transition service agreements are common when a large company sells one of its activities or certain non-essential assets to a less demanding buyer or to a newly created company in which management is present, but where the back-office infrastructure has not yet been assembled. They can also be used in carve-outs, in which a large company relocates a split to a separate public company and then provides infrastructure services for a defined period. When a company decides to follow an acquisition or divestiture, there are many issues to consider. Too often, parties neglect until late in the process whether services should be provided after closure as part of an Interim Services Agreement (ASD). This article explains the general context in which ASDs are needed and provides advice on how to begin recording and analyzing ASD requirements to avoid unnecessary costs, delays and inefficiencies. The TSA is the basis on which a successful acquisition transfer is based, but only if it is given the attention it deserves upstream.



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