Transition Services Agreement

Summary

This template transition services agreement (TSA) ensures that the seller in an M&A transaction continues to provide certain specified services, or makes available specific personnel, to support the continued operation and transition of the acquired business from the seller to the buyer post-closing. This template includes practical guidance, drafting notes, and alternate and optional clauses. A buyer in an M&A transaction may request that the seller provide certain services to the acquired business and/or buyer for a limited period of time post-closing to support the seamless and continued operation of the business during the ownership transition. This may be necessary where, for example, the target business shared or received personnel, resources, or other assets from the seller, or shared these resources with another entity under common ownership with the target business. Transition service concerns arise most frequently in deals involving the sale of a division or subsidiary of the seller and in deals structured as asset acquisitions involving a privately owned target business, but may be present in any transaction where the target business relies on the seller or another person, entity, or business under common ownership with the target business for a key aspect of its operation. These problems are generally addressed by the parties' entering into a transition services agreement (TSA) providing that the seller or another person will make available to the acquired business the services, resources, and/or personnel specified in the TSA for a limited period of time post-closing and at an agreed-upon cost. The specific types of services covered by a TSA can vary from business to business, but TSAs often address back-office type functions such as administrative, personnel, accounting, legal, technical, information technology, data security, human resources, or related services. For example, a target business may be entitled to share licenses to vital computer software under a contract made by the parent of a larger group of businesses. In an asset acquisition of the target business, and in the absence of a transition services agreement addressing its continued use of the license, the target business may lose the ability to continue using that software post-closing, requiring buyer to source a substitute as quickly as possible to avoid downtime and a costly disruption to the business. Attorneys should note that the exact terms of a TSA are very deal-specific and particularly sensitive to the exact nature of the underlying M&A transaction, the acquired business, and the nature of the transition services requested or required to be provided. You should modify this template as necessary to reflect the contours of your transaction as necessary. Also not that this template TSA includes optional provisions addressing the lease of facility space by the buyer as part of the transition services, and for the provision of additional services to be specified under a separate exhibit. This template may be modified to address other transaction-specific support needs agreed upon by the parties. For a broad collection of resources specific to asset acquisition transactions, see Asset Acquisition Resource Kit. For additional ancillary agreement resources, see Ancillary Agreements in M&A Transactions Resource Kit. For further information on TSAs and a template TSA for spin-off transactions, see Transition Services Agreements in M&A Deals, Transition Services Agreement (Spin-Offs/Equity Carve-Outs), and Integration Planning in M&A Transactions. For additional information on ancillary documents in spin-off and divestiture transactions generally, see Ancillary Agreements in Divestiture Transactions.