One of the most stressful elements of an ASD for buyers is the lack of immediate control over employees and operations. For example, during the transition period, buyers do not have 100% autonomy from new employees and cannot recruit new employees. Buyers also have to rely on sellers to take responsibility for new employees, which leads to additional complexity. When a business is sold or a division is cut, the seller is expected to continue to provide certain services to support the buyer while expanding its business. 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. Since a transitional service contract is only one component of a merger and acquisition transaction, it generally contains or has only the most fundamental provisions for: transitional service agreements can be very difficult to manage if they are not properly defined. One may have a temporary service agreement which is a short administrative agreement for the back office, in which fees will be set in the future and will not require formal service standards, or one may have a complete agreement with a well-defined perimeter, a level of service, a pricing system and privacy/data protection rules. A poorly developed service contract may result in disputes between the two parties over the level of services to be provided. An effective transition services agreement should cover the following key elements: a transition service contract is a contract whereby the vendor should provide ongoing services in a merger and acquisition transaction to support the subsequent closing entity. These services may include IT, personnel, accounting and other infrastructure services. An agreement for the provision of such a service is usual when the buyer lacks the system or management capabilities to absorb the acquisition on his own, but not the seller. This can happen when a larger company sells a division to a buyer with less infrastructure sophistication.
For example, a new company that has not had time to establish such skills. Similarly, a technology company carries out a carve-out operation, in which the seller has agreed to provide certain basic accounting activities for a specified period of time as part of an ASD. The buyer quickly realized that in an area that can be incredibly complex for compliance, it was not covered by legal requirements. So let me add a thought to your first checklist: will you be better off in the long run to relocate operational services to a trusted partner from the start? This can be cheaper and less risky because you get local knowledge about regulation in addition to providing services – knowledge that stays at your NewCo and doesn`t disappear at the end of an ASD.