Transition service agreements can be extremely difficult to manage if they are not properly defined. 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. 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. An ASD is a fairly accurate business example for real events: Mom and Dad help with their son`s expenses for the first few months he works, but pretty quickly he is able to take care of everything on his own. It`s not that an ASD on his face is complex; But that`s what`s in the TSA agreement, which brings a lot of headaches and potential hiccups. A Transitional Service Agreement (ASD) is concluded between the buyer and the seller, who envisages the seller to provide assistance to the infrastructure, such as accounting, IT and human resources, after the transaction is completed. TSA is common in situations where the buyer does not have the management or systems to absorb the acquisition, and the seller can offer it for a fee. 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.
In each transaction of the M-A, which has a transition services component, it is the responsibility of the buyer and the seller to reach an agreement on certain important considerations before the completion of the transaction. These considerations should be negotiated as soon as possible by the parties to the TSA, ideally during the due diligence phase.