The Low-Down on the Transition Services Agreements

Standardized Legal Documents The Low-Down on the Transition Services Agreements

Transition Services Agreements—What Are They All About?

Legal documents are tricky to understand for regular people, whether they are dealing with business, real estate, or any other sphere. Transition service agreements are a particular type of business contract that you may be struggling to figure out.

DoNotPay is here to tell you that you don’t need to go out of your way to research all the complicated terms in a transition service agreement. This article will answer all of your questions in one place!

You’ll also learn how to write contracts on your own effortlessly and without spending tons of money on a lawyer!

What Are Transition Services Agreements?

A transition services agreement (TSA) is a legal document between a buyer and a seller of a company. The selling company—also called a parent company—agrees to provide certain services to the purchasing company until the buyer has established themselves and can operate the departments without the help of the TSA.

The agreement outlines what kind of services the seller will provide to the buyer, for what kind of compensation, and for how long.

The services the seller will provide usually involve these categories:

  • Accounting
  • Information technology (IT)
  • Human resources (HR)

Another common name for a transition services agreement is a transitional services agreement.

What Situations Call for a TSA?

When one company wants to buy another but doesn’t have the means to operate or maintain certain departments, the selling company can agree to provide the services for the purchasing company. Once the purchasing company creates the departments they need and is overall well-established, they may no longer need a transition services agreement.

The purchasing company is usually a relatively new business that is buying out a division of a larger business.

Another example when transition services agreement is needed is when a company ‘carves out’ its non-essential units and sells them to investors. This practice is called divestiture. The selling company provides services to the buyer until the buyer has money, manpower, and machinery to run the non-core units they now own themselves.

The buyer and seller can also exchange only a division within the seller’s company.

What To Consider Before Entering a Transition Services Agreement?

Here’s how to approach entering a transition services agreement:

  1. Envision the outcome of the agreement—decide right away what you want to accomplish with the acquisition. Form a plan that tells you where you want your business to stand in the following period. Having a vision and a clear plan will help you decide how long you want the agreement to last and what scope of services you’ll need or provide
  2. Define the scope of services to be sold and bought—determine whether the performance of services in your agreement will be reasonable, substantial, or satisfactory. If the purchasing company runs into major issues, the agreement should state whether the parent company will go out of their way to help them to resuscitate their departments or they are only there to provide routine services  
  3. Begin negotiations early and form a strategy—start the conversation with your partner early and have a clear negotiation strategy you’ll implement if you want to get the most out of the deal
  4. Calculate the cost of each service—to avoid any financial disputes in the future, assess each service you’ll buy or provide and put a clear price on them. You also want to include cost pass-throughs and wind-down costs in your calculations
  5. Determine how much access the other party will have to your information, technology, and manpower—the selling and purchasing company should define what exactly will be acquired through a TSA. The agreement should state whether the buyer can borrow or hire an expert from the parent company that wasn’t part of the initial acquisition

How To Draft Your Transition Services Agreement

Since your TSA needs to be customized to reflect your situation, you should not rely on contract templates to compose it.

A better idea is to draw up your own TSA agreement. Here are the sections you have to include in it:

Transition Services Agreement Sections

Information To Include

Names of the parties
  • Full legal names of the selling and purchasing company
  • Names of any third party companies 
Services description
  • Exact nature of services
  • Scope—reasonable, substantial, or satisfactory
Pricing and payment terms
  • Services cost
  • Payment schedule
  • Costs of services beyond the scope described in the agreement
Duration and termination
  • Start and end date
  • Details about how the agreement will end when the purchasing company has the means to run the departments it bought
Warranties and obligations
  • Duties of each party to the agreement
  • Actions that will be considered a breach 
  • Name of the party that will be responsible for warranties and compensating for the mistakes
Intellectual property (IP) rights clause
  • Intellectual property that will be used
  • Description of intellectual property—such as patents, copyright, trademarks, trade secrets, or franchise
  • Exclusivity of IP rights—sole, exclusive, or non-exclusive 
Confidentiality clause
  • Confidential information
  • A statement that the parties will not disclose confidential information to another party 
Dispute resolution
  • Predictions about future disputes
  • Strategies to resolve those issues

Say Goodbye to Shabby Templates With DoNotPay by Your Side

DoNotPay can help you write legal documents without any previous experience! You no longer need to rely on incomplete and outdated contract templates you find on the internet. Our Legal Documents feature creates a tailor-made contract for you that:

  • Is up to date
  • Includes specific terms and conditions you need
  • Abides by the governing law in your state

If you want to start making legal documents with the help of our AI-powered app, you only need to make a DoNotPay account and:

  1. Type in the name of the legal document you need
  2. Answer a few of our chatbot’s questions about the document
  3. Download your personalized document once it’s ready

DoNotPay Creates Various Contracts for You!

With your DoNotPay account, you can enjoy access to all kinds of legal documents. Here are some of the most popular ones:

Do Not Let Companies Burn Your Pocket—Fight Back With DoNotPay

In the golden age of consumerism, it’s easy to fall for greedy corporations’ tricks and waste your money, sometimes without even knowing it. We are here to nip the money-grabbing techniques in the bud!

With your DoNotPay account, you’ll be able to sign up for free trials without worrying about losing money once the trial expires. Are you also concerned about your privacy since most free trials require credit card info? With DoNotPay’s virtual credit card, your privacy will remain intact.

Say goodbye to drawn-out refund and cancellation processes with the virtual assistant extraordinaire by your side.

If you need help returning an item or claiming its insurance or warranty, we’ll help you throughout the entire procedure.

Need Some Extra Money? Find Unclaimed Funds or Get Compensations

Whether you need help with bills, you’re strapped for cash, or you just want to get your money back but you can’t bear dealing with customer service, we know what to do!

DoNotPay can help you overturn your parking tickets, apply for a college fee waiver, lower your property taxes, and get free raffle tickets. We can also show you the best way to discover your unclaimed money and obtain different types of refunds and compensation involving airlines, gift cards, and late deliveries.

Want your issue solved now?