Transition Services Agreement Practical Law

Transition services will be a key part of buyer integration planning. To ensure a smooth transition, you start planning at an early stage. Identify and name some people who lead transition efforts for each key area of services and identify those responsible for those areas with the vendor. Regular meetings or conference calls between integration teams allow for debate on all issues and adequate preparation. The buyer must indicate contractual restrictions related to the services provided to the acquired business. As has already been mentioned, some services may have been provided under agreements over the entire framework and must be divided into different contracts. Contracts may provide services to multiple parties, while these parties are considered related parties, but do not allow multiple parties to use the Services as soon as there is no longer an affiliate relationship. In addition, the buyer will want to identify all contracts that involve restrictions on the use of services by third parties or confidentiality restrictions that would prohibit a buyer from sharing with the seller the information necessary to provide the services. Careful identification of the scope and nature of the services to be provided and advance transition planning allow the purchaser to gain greater control over the integration process and identify barriers prior to closure. By reflecting on transitional benefits from the initial due diligence phase, the purchaser can better prepare to effectively transform the transaction acquired at the close and to continue the transaction in the same way as before the acquisition. The use of intellectual property may be covered by a licensing agreement and not by a transitional service provision agreement. If the required transition services are not important and focus on intellectual property, the parties should consider licensing or other agreements instead of negotiating a separate transition services agreement. The provision of transition services can have a direct impact on the buyer`s ability to properly manage the transaction acquired after the transaction is completed.

In the event that the seller does not provide services (or does not provide a certain level of services), the purchaser may, in the case of a CA transaction, be required to take corrective action that does not adequately remedy the effects of such a failure. For example, many transitional service agreements provide that an aggrieved party may attempt to resolve a dispute or sue the other party. Given that transition services are supposed to be time-limited and are often not tied to the payment of a significant amount of fees, it is unlikely that the purchaser will want to arbitrate or take legal action to assert his rights under a transition services contract. This can leave the buyer with a significant risk with respect to the services provided by the seller. Many acquisitions include the seller and his related companies that provide services to the buyer and his related companies for a limited period after the closing of the transaction in order to change the transaction to be acquired.