The “honeymoon” and relationship between Buyer and Seller will inevitably change once a deal has closed, regardless of how well the two may have worked together leading up to Day 1. In addition to negotiating and executing the Transition Services Agreement (TSA) and relevant schedules for each functional area, there is one area that is commonly overlooked prior to close–the TSA operating processes and procedures. When done right, they offer important benefits, such as a faster close, risk reduction and a smoother transition. For example, if the Target company terminates a TSA service too early, business operations can be disrupted.
These processes, established prior to the close by the Separation Management Office (SMO), govern all aspects of services being provided under the TSA and are crucial to the measurement and management of the one-time carve-out and operating budgets. Additionally, they help ensure the level of service being provided is meeting service level agreements while not disrupting the business. Finally, they help empower the various functional teams (e.g. HR, IT, Finance & Accounting, Operations) with a framework to add/terminate services and escalate issues that cannot be resolved within their functional area.
Below are the four most important TSA processes as well as key responsibilities of the TSA stakeholders:
If Parent and Target agree, electronic signature software should be used as a tool to improve compliance and tracking sign-offs throughout the above monthly processes.
Getting the TSA operating processes agreed upon early is an important component to successfully navigating the carve-out. We have been engaged multiple times to provide carve-out expert witness testimony for mismanaged divestitures and with little exception, these transactions have failed because the best practice TSA operating processes outlined above were not followed.
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