The TSAs provides a structured approach to managing the complexities of transferring a business and bringing benefits to both the seller and the buyer.

• Typical benefits to the seller:
  • Enables the sale of an integrated business unit/product range/brand prior to full carve out;
  • Improves the purchase price based on the attractiveness of the transaction and the need for business continuity during the transition; and
  • May provide an opportunity to make a margin on the services to be provided under a TSA.
• Typical benefits to the buyer:
  • Facilitates the seamless transition of operations, and guarantees business continuity throughout the agreed transitionary period;
  • Flexibility in integration of acquired business at a manageable pace;
  • Flexibility in usage of services throughout the transitionary period;
  • Ensures services are provided at agreed-upon quality levels; and
  • Provides legal protection.

To achieve a speedy and smooth transition, it is important that the TSAs are crafted well. These best practices will help encourage robust negotiation to navigate potential pitfalls of TSAs. The following are typical best practices for establishing effective TSAs:

• Clearly define the scope of services included in each TSA, detailing the service levels, performance metrics (KPIs), frequency, timelines/durations, responsibilities, specific exclusions, related costs, legal and regulatory compliance, data access and privacy, and use of IT systems to reduce disruptions. The TSAs should ideally be defined early in the process, even before the buyer(s) has been identified, to streamline negotiations through clarifying the services to be provided.
• Provide a transparent pricing and costing structure, where the fixed fees, per-unit cost, etc. are called out clearly andinclude a mechanism to allow for the periodic adjustments to address cost fluctuations.
• Provide clear performance metrics/key performance indicators (KPIs) with which the service levels and transition objectives will be measured. This can include penalties if the seller fails to meet agreed service levels. Establish periodic reporting mechanisms to monitor performance and address non-performance issues.
• Establish and effective joint governance mechanism (e.g. a joint Steering Committee), consisting of role players from both the seller and buyer. This includes regular a clearly defined reporting and escalation process through which performance is monitoredand irregular performance identified early, and necessary corrective actions put
  in place early (via a defined change management process). For the management of disputes, a clear process should be defined, which includes use of mediation and/or arbitration to resolve disputes quickly and effectively.
• Design the TSAs for flexibility and adaptability, as the needs of the seller and/or buyer could evolve during the transition period. This includes establishing a structured change management process, through which these changes are jointly reviewed, agreed, and implemented. Where required, include provisions to extend the TSAs beyond the original timeline.
• Drive the TSA exit process through early preparation, by defining and agreeing an exit process for each TSA, in line with the agreed exit timelines. A key component is to understand the implications on the business continuity following the TSA exit, and ensuring that the necessary mechanism are in place to maintain business continuity during the TSA exit.