132021Apr

Transitional Services Agreement Checklist

Determine whether the service provider has sufficient rights under its existing upstream contracts and licences to provide the requested services on its own, or whether third-party agreements and licences need to be concluded or amended. 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. If you are a commercial transaction lawyer or a procurement or procurement expert, it is likely that you have been asked (probably more than once) to help you conclude a Transition Agreement (ASD) as part of an A.M. transaction. Depending on the complexity of the transitional service agreement and the critical nature of the services provided, ASDs can range from short-term back-office administration contracts, with royalty setting agreements and no formal service standards, full service agreements at defined scope, service levels, variable pricing rules and detailed data protection rules. 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. The design and management of transition service agreements to achieve a quick and clear separation was recorded third-party approvals should be identified as early as possible in the due diligence phase, as associated services may require considerable time for a formal transition. But no matter the details of your ASD, there are two major risks you might not consider: compliance risk, incorrect assumptions about the services required, and operating costs for ass service processing.

Service levels must be defined in the TSA or in the support documentation with the correct detail so that the parties can understand exactly how the requested services should be provided, without giving contractual „outs“ to the provider. Be prepared to identify the specific services that are provided, the appropriate service standards and the applicable costs and expenses. Indira Gillingham, senior manager, and Mike Stimpson, senior manager at Deloitte Consulting LLP, provide practical advice on using ASD to achieve a quick and clear separation. An ASD can expedite the negotiation process and financial conclusion by allowing the agreement to be reached without waiting for the buyer to assume responsibility for all critical support services. Consider the criticality and complexity of the services requested, as well as the cost and timing of the conclusion or modification of third-party agreements (given the possibility of third parties having reasonable leverage and little incentive to provide short or transitional services). Often, an ASD is considered an ancillary agreement and is only considered late in the transaction by people who do not have much experience in managing service arrangements. Depending on the services provided, an ASD can be a complex and sometimes controversial document. As commercial transaction lawyers, we continue to try to convince our colleagues at M-A that the involvement of competent experts (like us!) at an early stage of the process will lead to a clearer and more „thoughtful“ contractual agreement allowing the parties to review and negotiate compliance and other requirements.