Establishing a decision matrix clearly specifying what services are available to the buyer after the transaction is completed and which services are not, as well as the reasons for these decisions (non-transferable licenses, transfer of key personnel with the deal, etc.) can give objectivity to what can often become a very busy interview. A Transitional Service Agreement (TSA) is an agreement between the buyer and the seller, in 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. « Providing transitional services at the end of a degree is a bit like paying alimony – no one wants to do so. But in the event of a divestment, it`s often a condition of an agreement, » says Jeffery Weirens, principal at Deloitte Consulting LLP, which specializes in DMs and restructuring. Preparing a detailed ASD prior to the start of divestiture negotiations can help parent companies avoid last-minute service negotiations leading to unfavourable conditions. Since ASDs are short contracts (3-6 months), the details of these agreements are sometimes overlooked throughout a transaction – either because of a lack of time for that part of the transaction or because the buyer is reluctant to spend more money on legal fees to negotiate the terms of the TSA – which can take time to negotiate. As a result, however, a poorly worded ASD can be very damaging and disruptive to both the buyer and the saddler`s transactions. Poorly formulated ASD can lead to misunderstandings, service interruptions and, ultimately, litigation – all of this is a misuse of resources after conclusion. As with any contract in a transaction of M and D, the best way is to use the services of experienced tax and legal advisors. Your business broker, accountant and lawyer each play an essential role in enthring your transaction smoothly and successfully. Some types of common services that require a transition are: as a seller, if you assume that transition services are requested by a buyer, then you should think ahead about the services you comfortably provide to the buyer and start preparing a « menu » of these services before receiving an offer – because after placing an offer , you may not want to allocate the time and resources to do so. You will also want to make sure that everything you offer is well described and evaluated so that you can live with the inconveniences that come with it. You will also want to structure your ASD to prevent the buyer from continuing to want you to provide these services over the long term.
In the case of turnkey operations, the smaller ones, managed by their owners, are often referred to as training and transition agreements. This article focuses on temporary service agreements. According to Weirens, many CIOs would prefer not to consider providing transition services for many reasons. « For IDCs, this represents many potential pain points.