Use this play to learn how to negotiate and finalize a divesture's TSA before signing and closing.
It’s not uncommon to find that the TSA is the last transaction document to be finalized before signing and closing. The document should be negotiated, taking into account both buyers and seller’s interests. The TSA will have a complete list of all transition-related services to be provided that cover the following:
Executive sponsor, separation manager and deal team
Meeting Agenda, Whiteboard, Strategy Documents
Spend one day or more to prepare materials for a two hour play.
The TSA should provide a description of service performance levels for each of the service elements, as well as specifications for all measures to be adopted for service-level monitoring and the agreed-upon frequency for measurement and reporting activities.
The Service Level should cover:
A clear definition of all service costs, costing methodologies, and invoicing procedures should be documented in the TSA as follows:
Service costs broken down by service elements.
Each TSA in-scope service is operationally managed and delivered by a TSA owner from the service provider. The TSA owner is also responsible for providing regular reports on service performance to the receiver. A list of such reports, including audit reports, reporting frequency, and a recipient list, should be clearly articulated in the TSA document. An outline of the procedures to report and escalate problems must also be defined and documented to support the overall governance model during TSA execution.
The divestiture governance process needs to take into account how the TSA should be governed post-close. The most critical roles required as part of the governance model include:
• Legal: Legal support for interpretation and issue resolution
• Finance: Support for payments and collections
• Tax: Advisory support on tax implications
Billing for TSA services needs to be set up in advance. The process involves identifying the cost centers that will be used to bill for each service at an appropriate level of aggregation (i.e., local, regional, global). A billing threshold criteria appropriate for the billing frequency (e.g., quarterly billing for more than $5000) should be defined in the TSA invoicing. Timeframes required for filing and resolving billing disputes should also be defined in the TSA invoicing and payment terms.