Transitional Service Agreements – the basics
In the case of a M & A transaction with a transaction component, it is up to the buyer and seller to agree upon certain key considerations before completing the M & A transaction. When a company is sold in a M & A transaction, the seller is expected to continue to provide services and support to the company after the transaction is completed.
Due to the integral nature of the transaction, both the buyer and seller may need to use other services, infrastructure and resources for the agreed period after the acquisition. [Sources: 5, 12]
A Transitional Services Agreement (TSAs) is a temporary agreement to continue providing services from the seller to the spun-off organization in order to accelerate itself, serve as a focal point for divestment planning and bring more security and peace of mind to the broader transaction.
A transitional service agreement sets out what kind of services the vendor will provide to the purchaser and what kind and amount of compensation. The seller and the buyer agree to provide each other with certain services, like essential business services (such as access to IT systems, accounting and other infrastructure support). [Sources: 4,9,11]
The services that the seller provides are transitional and should only be used for a certain period of time while the divested business builds its own capacity. [Sources: 9, 11]
These services range from a short service agreement for back-office management (an agreement to determine future fees and formal service standards) to a more comprehensive service agreement that defines the scope of services, the amount of variable fee agreements and detailed information security and privacy provisions. [Sources: 6, 8]
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Sources
[0]: https://www.divestopedia.com/definition/888/transitional-service-agreement-tsa
[1]: https://www.tmf-group.com/en/news-insights/articles/2017/june/guide-to-tsa/
[2]: https://www.linkedin.com/pulse/transitional-service-agreements-path-successful-mark-norton
[3]: https://www.macouncil.org/blog/2019/03/22/structuring-and-management-transition-service-agreements-tsa-carve-outs
[4]: https://donotpay.com/learn/transition-services-agreements/
[5]: https://ryanreiffert.com/blog/transition-services-agreements-overview-and-new-developments/
[6]: https://www.morganlewis.com/pubs/2016/03/considerations-in-transition-services-agreements-in-ma-transactions
[7]: https://middlemarketgrowth.org/the-portfolio-what-to-know-about-transitional-services-agreements/
[8]: https://blog.protiviti.com/2021/03/19/transition-service-agreements-early-planning-avoids-these-10-common-pitfalls/
[9]: https://www.infosecurity-magazine.com/opinions/transition-service-agreements-data/
[10]: https://www.mayerbrown.com/en/perspectives-events/publications/2010/09/transition-services-agreements-in-acquisitions-and
[11]: https://thinkfcm.com/insights-news/a-tale-of-two-transition-service-agreements/
[12]: https://www.jdsupra.com/legalnews/contract-corner-key-provisions-in-68803/
Sources
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[2]: https://www.td.org/atd-blog/what-is-the-metaverse-where-we-are-and-where-were-headed
[3]: https://en.wikipedia.org/wiki/Metaverse
[4]: https://www.usatoday.com/story/tech/2021/11/10/metaverse-what-is-it-explained-facebook-microsoft-meta-vr/6337635001/
[5]: https://time.com/6116826/what-is-the-metaverse/
[6]: https://www.theguardian.com/technology/2021/oct/28/facebook-mark-zuckerberg-meta-metaverse
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[9]: https://theconversation.com/the-metaverse-is-money-and-crypto-is-king-why-youll-be-on-a-blockchain-when-youre-virtual-world-hopping-171659