Practical advice on using Transition Service Agreements (SAAs) to achieve a quick and clean separation. Because TSAS is only one component of the entire M&A transaction, TSAS generally does not contain, or contains, minimum provisions for compensation, warranties, service level agreements, business continuity and disaster recovery, data protection and information security. While the parties may be willing to take a potential risk, they must recognise that after the conclusion, the relationship between the seller and the divested entity is similar to an outsourcing relationship from the point of view of data protection and information security. Once the transaction is completed, the divested company is no longer a group company, but a third party during the transition period – and there are many countries that have data protection laws that require permission to share personal data (PII) with third parties. Given the time and resources often required to complete an ASD, the parties should determine at an early stage whether an ASD is warranted. Not all agreements require TSA: the provision relates to the networking of the vendor and the target business, as well as the specific capabilities of each party. Conversely, in complex situations where the target business depends on systems shared with the seller`s owner company or where the buyer itself is unable to provide the necessary services, multi-year ASD may be required. Multi-year TSAs give the buyer more time to disconnect from the seller and learn their own skills to manage the target business. The scope of TSA forward services and reverse TSA services should certainly be at the forefront, as is the case in other service contracts such as outsourcing contracts. Unlike other service contracts, TSA is only one component of the entire M&A transaction for which neither party is willing to take on additional responsibility. As a result, SATs generally do not include any indemnification, warranties, service level agreements, business continuity and risk recovery, data protection and information security, or contain minimum provisions to this effect.
TSA versus outsourcing agreementsSowohl TSA and subcontracting typically involve one party providing the other with services that may be essential to the operation of the licensee`s business. .