Last week’s challenge:

We at Acme Inc. have had one too many lawsuits from coyotes as a result of defective anvils. As a result, we’ve decided to divest the anvil unit which will allow us to focus on our other consumer goods business. Luckily, we found a buyer in Widgets Inc. where our interests align.

Given the TSA discussion this week, what would be good items to cover to ensure a speedy divestiture?

The best way to think of the TSA is both as an insurance policy and a services agreement. While the TSA may not be required for this case, going through the exercise will be helpful.

Before we dig into it, the description is a tad vague. Mainly what does it mean to divest the anvil unit? Is this just the customer list? Manufacturing? R&D? Will there be employees coming along as well? Also, while the goals of Acme Inc. are clear, we know next to nothing about Widgets Inc.

Needless to say, there is some clarification that still needs to happen that can expand the scope for any transition. Additionally, Acme Inc. may be playing the role of service provider which will expand based on the questions above.

Regardless of the approach, the TSA will outline the terms, conditions of service, limitations, liabilities, confidentiality, and warranties. It’ll also outline the services being provided by the seller: services, costs, duration, level of service, and paths of communication.

Assuming a simple case of inheriting just the customer list, I’d expect the TSA to outline what the data is, how it will be provided, whether it will be refreshed (and what frequencies), and for how long. There maybe some additional terms on the how side to account for any additional hardware/software required to perform the transfer, and points of contact for those that will be facilitating the work on both side.

Taking a more complex case of not just the customer lists, but the manufacturing and R&D efforts, then the complexity expands considerably. Especially since this would imply bringing some employees over and possible third-party contractors responsible for part of the work.

Some applications (such as Acme’s CRM) will not be conveyed, but the customer lists made available (just like above). Other applications, such as the ERP system used to track the procurement and manufacturing of Anvils will have hooks to other systems that will be conveyed (Anvil Designer Studio used by the R&D department for example). The TSA will be used to allow for a set period of time that these apps can continue to interact with Acme’s ERP system until such a point where they get ported over to Widget Inc.’s new system.

Just like any contract, the TSA provides the guidelines and terms for conveying the applications. Going through the exercise of preparing one will outline not just where the dependencies are between the apps and data being conveyed, but also forces the establishment of a timeframe to completion. When enacted, they also act as an insurance policy so that you have the access available if/when needed.

Does this jive with your take. If not, hit REPLY and let me know!

cab