In addition to the information about Transition Service Agreements (TSA) in the previous two posts, here are three more important points that you should discuss during the transition process.
Major Projects
The seller should identify major projects that are in process, or scheduled to be performed, for the target business. Considerations may include: (i) complexity; (ii) current status, including remaining work and completion time frame; (iii) current and planned future investments; and (iv) potential costs and other impacts of termination prior to closing.
Personnel
The seller should determine which personnel support the target business including the employing entity, work locations, locations supported by such personnel, whether such personnel are to be retained by the seller or transferred to the buyer and whether any such personnel are critical or “key” to the operation of any business.
Buyer Requirements
The buyer should evaluate the seller’s responses through due diligence to understand the systems and services used to run the business. The buyer should identify potential overlaps and gaps in its own capabilities and systems. In the event of overlaps, the buyer should identify which overlapping item should be retained after closing. In the event of gaps, the buyer should identify how the inadequate or lacking systems or services will be addressed, such as through the buyer’s current systems and services, TSA services or newly procured systems or services. Incompatibilities with the buyer’s current systems should be identified so alternative arrangements can be made. The buyer should also assess sourcing options for the target business when the TSA ends.
TSA issues are rarely paid attention to early in the process of selling or buying a company. When left to the end, unnecessary delays and costs can result. Proactively addressing these issues up-front can help avoid these problems.