TSA (Transition Services Agreement)
TSA (Transition Services Agreement) a contract where the seller provides specific operational services to the buyer for a defined period after closing.
It serves as operational life support while the buyer learns to run the acquired business independently.
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How TSA Works
A Transition Services Agreement (TSA) is a critical post-acquisition contract that bridges the gap between sale completion and full operational independence. It covers essential services like payroll, IT support, customer service, and regulatory compliance.
The TSA is more than a simple service provision—it's a strategic tool that can determine the success of a business transition. Poorly structured TSAs can lead to operational challenges, legal complications, and potential earnout disputes.
Typically lasting 12-18 months, TSAs provide a structured framework for knowledge transfer and operational continuity. They include specific service categories, performance metrics, and clear termination provisions to protect both buyer and seller interests.
Key Points
- •Covers critical operational services during business transition
- •Defines specific service levels and performance standards
- •Typically runs 12-18 months with cost-plus pricing
- •Directly impacts post-acquisition business performance
- •Provides legal and operational protection for both parties
Frequently Asked Questions
Related M&A Concepts
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