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. Practical advice for using Transition Service Agreements (ASDs) to achieve a quick and clean separation. 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 development and management of transitional service agreements to achieve a quick and clear separation has been saved. As a general rule, poorly developed ASDs give rise to disputes between the buyer and the seller over the extent of the services to be provided. About the author: Mr. Chittur P. Narayan is the principal director of integration ATM management at CBRE, Inc., the world`s largest company.
He has more than 25 years of experience in management consulting, pricing, revenue management and integration in the area of AM. He led the Transition Service Agreement (TSA) office for the largest acquisition in CBRE`s history and, as an Integration Management Office (IMO), was the leader in more than 10 transactions in several industries and regions. He is also Alumnus of the training programs of the M-A Leadership Council. A consumer goods company acquired a large spice business, which was separated from its parent company. In order to ensure the continuation of activities during the transition period, ASD services were introduced, but the duration of service was limited to only six months. In summary, while the above considerations will contribute to the effective structure and management of an ASD, the importance of maintaining a good working relationship with the seller during the TSA period should not be underestimated. Remember that sellers also want the Carveout to succeed and try to avoid negative perceptions of the press and the market caused by service interruptions. Maintaining collaborative cooperation (rather than confrontation) with important stakeholders on the seller`s side will go a long way to ensuring a satisfactory exit from the TSA! 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 devote enough time to planning the TSA, considering that the price structure of ASD services must be clearly defined and structured, based on well-measurable metrics. B for example, for support staff, MIPS for computing power, Gb for memory, etc. Each TSA service must be independently calculated where possible. Avoid a situation where the price of a TSA service depends on or is related to another TSA service – this will make it difficult to leave individual services without leaving all services.