Buyer Beware: A Quick Guide To Transaction Services Agreements

When a company is sold or when a division is carved out, there's an expectation the seller will continue to provide certain services to support the buyer while it establishes operations.

Often the parties enter into what is known as a Transition Services Agreement (TSA), governing the temporary provision of services to the NewCo. Both parties should consider if this is needed as early in the process as possible, what the scope will include, and what the duration of the TSA will be based on the complexity of the transaction.

The onus is on both buyer and seller to reach an agreement on certain key considerations prior to the closing of the M&A transaction, though the buyer is the one with the most at stake if things don't go according to plan. Consideration must be given to, for example: