Often, the seller has to rely on its own suppliers and service providers to provide services to the post-closing business. Determine whether, under its existing upstream agreements and licenses, the seller has sufficient rights to provide the requested services itself or whether third-party agreements and licenses need to be entered into or amended with the seller`s vendors and service providers. Given the criticality and complexity of the services requested, as well as the costs and date of conclusion or modification of agreements with third parties (taking into account that third parties may have useful leverage and little incentive to provide short-term or transitional services). A transition service agreement (TSA) is an agreement between a buyer and a seller in which the seller enters into its services and know-how with the buyer for a certain period of time in order to support the buyer and get used to its newly acquired assets, infrastructure, systems, etc. Barbara Melby is a partner in Morgan, Lewis & Bockius` Philadelphia office and director of the company`s strategic sales and outsourcing practice. This was co-authored by Jason Rodriguez. Service levels should be defined in the TSA or supporting documents with the appropriate level of detail, so that the parties can understand exactly how the requested services are to be provided, without giving the seller contractual “outs”. Avoid adholding “reasonable business efforts,” “economically reasonable,” “best business efforts,” and similar performance standards that could allow seller to technically operate in accordance with the TSA, but without actually providing the requested services in a manner that provides buyer with the benefit of their agreement. What remedies are available to the buyer if the seller is not working properly under the TSA? A seller may have little incentive to work after closing in accordance with the service levels set out in the TSA and its supporting documents, unless there is explicit lump sum compensation that can be recovered by the buyer – standard indemnities may not be sufficient motivation. For maximum enforcement, you should consider a clawback against a trust service for insufficient benefits under the TSA (although this may be difficult to negotiate as part of the larger M&A deal).
A Transitional Service Agreement (TSA) is between a buyer and seller and provides that once the transaction is complete, the seller will provide infrastructure support, such as accounting, IT and HR. TSA is common in situations where the buyer does not have the management or systems to absorb the acquisition, and the seller can offer it for a fee. Practical advice on using Transition Service Agreements (SAAs) to achieve a quick and clean separation. Transient service agreements can be extremely difficult to manage if they are not properly defined. As a rule, poorly formulated SADs give rise to disputes between buyer and seller, focusing on the extent of the services to be provided. An ASD is a fairly accurate business example of real events: mom and dad help spend their son for the first few months he works, but soon enough he will be able to take care of everything himself. It`s not as if, at first glance, ASD is complex; but that`s what`s in the TSA deal that causes a lot of potential headaches and hiccups.