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Technology	Transac.ons	&	Transi.onal	
Services	Agreements	(TSA)	
	
This	paper	was	prepared	for	an	IBA	Conference	in	Seoul,...
Introduc.on:	
•  Michael	is	a	senior	sourcing	lead	and	IT&T	lawyer	with	15+	
years	purchasing	experience	for	global	financi...
Quick	Overview:		
•  What	are	transi1onal	services	agreement	(TSA)?	
•  What	are	the	drivers	for	buy	side	/	sell	side	/	su...
What	are	transi.onal	services	
agreement	(TSA)?		
©	Michael	Robertson
•  M&A	technology	transac1ons	oQen	require	the	seller	to	
transi1on	exis1ng	opera1ons,	suppliers,	goods	and	services	to	
t...
TSA	Key	Terms:	
–  Details	of	services	(what	will	the	seller	do)		
–  Length	of	.me	that	services	or	goods	will	be	provide...
What	are	the	deal	drivers?	
©	Michael	Robertson
•  What	does	the	Buyer	want?	
–  Integra.on	Deal:	buyer	likely	to	flick	and	switch	services	
and	suppliers	ASAP	at	lowest	c...
•  What	does	the	seller	want?		
–  Minimise	services,	services	levels,	costs	(post	transac1on)	
and	mi1gate	future	risks	(...
Traps	&	issues	to	consider:	
©	Michael	Robertson
Access	to	SME	and	Stakeholders	with	domain	/	opera.onal	
knowledge:			
•  Are	there	sufficient	SME	with	domain	/	opera1onal	...
Do	you	understand	the	supply	base,	contracts	and	key	
personnel?		
•  What	are	the	sellers	and	buyers	supply	arrangements	...
This	analysis	will	drive	the	TSA,	integra.on	savings	and	deal	
valua.ons.		
Issues	to	think	about:	
•  who	are	sellers	key...
Issues	to	think	about:	
•  Buyer	and	seller	should	consider	a	joint	suppler	
communica1on	strategy	to	increase	leverage,	s...
Factor	in	regulatory	approvals:		
•  Financial	services	regulators	globally	(including	HKMA	&	MAS	
in	Asia)	are	becoming	i...
Avoid	delaying	resolu.on	of	key	issues:		
•  During	M&A	transi1on	issues	are	oQen	parked	or	moved	to	
post	signing	to	ensu...
Q&A		
©	Michael	Robertson
•  	Pro.vi.	-	Guide-to-Mergers-Acquisi.ons	
hhp://www.pro1vi1.com.au/en-US/Documents/Resource-Guides/Guide-to-Mergers-Acqu...
Thank	you	for	your	.me:	
	
Michael	Robertson,	
Director,	MR	Consul.ng	
T:		+852	68011690	
E:			michael@mrconsul.ng.asia	
	...
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MRC - Technology M&A Transactions & Transitional Services Agreements (TSA)

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This paper was prepared for an International Bar Association (IBA) Conference in Seoul, Korea in November 2015. Panel discussions focus was carve-outs in technology M&A transactions, technology transition and license agreements

IBA Conference: 2015 Mergers & Acquisitions in the Technology Sector: Current Trends in Asia and Beyond (Seoul, Korea)(November 2015)

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MRC - Technology M&A Transactions & Transitional Services Agreements (TSA)

  1. 1. Technology Transac.ons & Transi.onal Services Agreements (TSA) This paper was prepared for an IBA Conference in Seoul, Korea - Panel discussions focus was carve-outs in technology M&A transac.ons, technology transi.on and license agreements IBA Conference: 2015 Mergers & Acquisi1ons in the Technology Sector: Current Trends in Asia and Beyond (Seoul, Korea)(November 2015) Michael Robertson Director, MR Consul1ng © Michael Robertson
  2. 2. Introduc.on: •  Michael is a senior sourcing lead and IT&T lawyer with 15+ years purchasing experience for global financial services, technology, telecommunica1ons and soQware companies •  Michael has been providing procurement, legal and consul1ng services in Asia since 2005 •  Michael has worked on, and led, customer, partner and supplier facing technology projects with values up to £300 million © Michael Robertson
  3. 3. Quick Overview: •  What are transi1onal services agreement (TSA)? •  What are the drivers for buy side / sell side / supply base and why do you care? •  What are some of the traps / issues to consider? •  Q&A © Michael Robertson
  4. 4. What are transi.onal services agreement (TSA)? © Michael Robertson
  5. 5. •  M&A technology transac1ons oQen require the seller to transi1on exis1ng opera1ons, suppliers, goods and services to the buyer for a period of 1me to ensure con1nuity of service at Day 1 •  TSA are required whenever an acquirer does not acquire full rights to an essen1al service, process or system (on comple1on) •  TSA are essen1ally short-term outsourcing / shared service arrangements and will generally involve mul1ple suppliers from buy & sell side and cover a wide range of technology, back office and other opera1onal areas as well as a variety of goods, equipment and services © Michael Robertson
  6. 6. TSA Key Terms: –  Details of services (what will the seller do) –  Length of .me that services or goods will be provided for (how long will seller be on the hook) –  Pricing and volumes (these are oQen subject to caps, volume-based pricing and service credits) –  Service levels, key personnel transfer provisions & co- opera.on with 3rd party provisions –  Performance and transi.on metrics (e g response 1me, error rates, service deficiencies) as well as governance and escala1on (for mul1ple par1es) © Michael Robertson
  7. 7. What are the deal drivers? © Michael Robertson
  8. 8. •  What does the Buyer want? –  Integra.on Deal: buyer likely to flick and switch services and suppliers ASAP at lowest cost –  New Market / New Offering: buyer wants to preserve, replicate and grow goods, services & supplier base –  Con.nuity: Buyers want to ensure on-going con1nuity from Day 1, have flexibility during Y1 (key change period) and ensure that the TSA will be opera1onal for 2-3+ years (1mes vary) –  Reduce services risk and cost during transi1on, preserve opera1onal value (Day 1) and enhance flexibility (TOM) © Michael Robertson
  9. 9. •  What does the seller want? –  Minimise services, services levels, costs (post transac1on) and mi1gate future risks (i.e the deals done go home) •  What doe the suppliers want? –  what are the drivers for the supply base and is it a cri1cal element of deal? © Michael Robertson
  10. 10. Traps & issues to consider: © Michael Robertson
  11. 11. Access to SME and Stakeholders with domain / opera.onal knowledge: •  Are there sufficient SME with domain / opera1onal knowledge from buy & sell side? Lawyers can help structure a TSA but the “meat in sandwich” is: –  Understanding the exis1ng opera1onal model and supply chain of seller –  Understanding the TOM and supply chain of buyer •  SME with domain & opera1onal knowledge simplify and speed up the TSA nego1a1on process. They circumvent deadlocks, take appropriate risk decisions and drive value and savings © Michael Robertson
  12. 12. Do you understand the supply base, contracts and key personnel? •  What are the sellers and buyers supply arrangements (soQware, hardware, services, equipment, leases, outsource arrangements) •  Who are the key personnel that need to transfer or be seconded for a period of 1me: •  Did your due diligence cover key suppliers, key personnel and future transi1on plans. •  Do you have a an integra1on plan with target cost savings post integra1on. © Michael Robertson
  13. 13. This analysis will drive the TSA, integra.on savings and deal valua.ons. Issues to think about: •  who are sellers key suppliers, what do they supply and who do they supply it to, what are the costs to transi1on suppliers services, are transi1on rights built in or subject to nego1a1on, are there key employees that are needed to transi1on & operate services and what is the overlap with buyer •  who are buyers / key suppliers, are there exis1ng rela1onships / overlaps in the supply base, which suppliers will be kept, who will be terminated and what are the 1meframes for this) © Michael Robertson
  14. 14. Issues to think about: •  Buyer and seller should consider a joint suppler communica1on strategy to increase leverage, speed up suppliers nego1a1ons and ensure the lowest cost and best terms for both buyer and seller © Michael Robertson
  15. 15. Factor in regulatory approvals: •  Financial services regulators globally (including HKMA & MAS in Asia) are becoming increasingly concerned by outsourcing risks, material subcontractors and customer data transfer. •  Even rela1vely small M&A transac1ons and the transi1onal services agreements themselves are likely to require new approvals. The buyer will need to demonstrate knowledge of the full supply chain and steps taken to mi1gate risks for outsourcing. •  A full supplier analysis and customer data analysis should be covered as part of the due diligence and a strategy to resolve should be agreed © Michael Robertson
  16. 16. Avoid delaying resolu.on of key issues: •  During M&A transi1on issues are oQen parked or moved to post signing to ensure 1melines are hit, this can cause problems down track as the leverage posi1ons change pre and post signing. •  In an ideal world buyer would do a full assessment, due diligence and lock down pricing, services, service levels, nego1ate with the new supply base agree a transi1on strategy and sign contracts for this •  If this is not possible M&A team must structure deal to ensure that there is sufficient financial and other leverage to resolve post signing issues © Michael Robertson
  17. 17. Q&A © Michael Robertson
  18. 18. •  Pro.vi. - Guide-to-Mergers-Acquisi.ons hhp://www.pro1vi1.com.au/en-US/Documents/Resource-Guides/Guide-to-Mergers-Acquisi1ons-FAQs- Pro1vi1.pdf •  Forbes, 20 Key Due Diligence Ac.vi.es In A Merger And Acquisi.on Transac.on hhp://www.forbes.com/sites/allbusiness/2014/12/19/20-key-due-diligence-ac1vi1es-in-a-merger-and- acquisi1on-transac1on/ •  DeloiYe, Bea.ng the Odds: How companies can improve value through M&A hhp://www2.deloihe.com/content/dam/Deloihe/us/Documents/mergers-acqisi1ons/us-ma-bea1ng-the- odds-021915.pdf •  Strafford, Dra[ing M&A Transi.on Services Agreements: Strategies to Maximize Deal Value and Mi.gate Risk hhp://media.straffordpub.com/products/draQing-m-and-a-transi1on-services-agreements-strategies-to- maximize-deal-value-and-mi1gate-risk-2014-08-14/presenta1on.pdf •  Mayer Brown, Services Agreements in M&A Transac.ons hhps://www.mayerbrown.com/files/Publica1on/96c23a96-f00f-42c3-9f70-0c4eeddd16e8/Presenta1on/ Publica1onAhachment/3feb3644-ed8e-4d21-b517-0f80b550740b/10290.pdf © Michael Robertson Further Reading:
  19. 19. Thank you for your .me: Michael Robertson, Director, MR Consul.ng T: +852 68011690 E: michael@mrconsul.ng.asia © Michael Robertson

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