Transition Services Agreement Information Technology

Pharmaceutical carve-outs generally include the agreement of three basic agreements, the SPA (sales and sales contract), the MSA (Master Services Agreement, which covers current deliveries from the facility) and the TSA (transitional service delivery agreement). It goes without saying that it is in the interest of both parties to ensure a continuous operation between the signature and the closing, as well as after the conclusion, with a smooth transition from the seller`s activity to the buyer. An ASD is normally agreed upon when the final agreements are signed, but the practical details and issues are only visible when the buyer`s and sellers` operational teams are activated. However, the postponement of detailed discussions on the TSA increases financial and operational risks, and Murphy`s Law is still in ambush. The key to accelerating the TSA is to know what the high-risk elements are going and this important activity is carried out by a team of experts experienced in these operations who can work with the seller and the buyer`s operational teams. Below is a brief summary of the keys to negotiating a good ASD before the conclusion. Disposals are generally difficult to obtain, especially when the people, processes and systems involved are deeply integrated into the seller`s business or when services and infrastructure are spread across multiple industries. Identifying and placing parts in a sale can be a complex and time-consuming process; However, experience and careful planning provide an effective result for both parties. During the planning process, participants in the relevant business units on both sides should consider the transition period between the transaction deadline (day 1) and the complete separation of businesses (day 2) to determine the strategy for each business process, associated applications and the underlying infrastructure. Internal teams are already overloaded with day-to-day tasks. Launching them into the deal process can be a massive distraction. What some would call multitasking is actually a dilution of focus, which results in fewer optimal results for all parties involved.

Regardless of the buy side or the Sell site, a dedicated resource with the right experience can quickly assess risks and requirements. In our experience, the resources involved in both deal teams can be directly involved in a reasonable agreement acceptable to all parties. In addition, when setting the service price, companies should consider different pricing options, including plus costs (plus percentage), escalating costs (a percentage increase per month over the life of the TSA) and a minimum fee (to protect investment in service delivery if the buyer unexpectedly cancels the service shortly after an agreement is reached). “With this information, the deal team can negotiate transition terms that are in line with the parent company`s financial objectives for the agreement,” weirens said.