Tsa Temporary Service Agreement

A diversified industrial company divested activities in its portfolio. Companies have tended to be highly centralized and have used a shared service center for back office, IT, HR, and purchasing. The activities of the companies also mixed distribution and manufacturing. KPMG was tasked with helping the client identify entanglements and develop a Day 1 operating model for “a typical asset in the portfolio”. This first exercise was the model for determining what a buyer should replace and what the seller would be willing to provide, and specific data elements were collected to help the customer determine prices and service levels. For example, in back-office processes, PPAs were collected and FTE estimates were made to support the processes. The high-level benchmarking allowed the client to determine how long it would take for a buyer to replace the services (i.e. by outsourcing) and how long the client would need to reduce lost costs. Scope, duration and LTC were documented in service plans used by the client as a starting point for its divestiture work. By working with functional teams, the company determined which services it would not provide and which services would be difficult to provide. The interweaving gave rise to possible measures that the client was willing to undertake before future restructurings and divestitures.

At the end of the fiscal year, the client team worked with members of the company`s development team to develop a common understanding of the trade-offs between different TSA options. Maintaining a TSA office on the buyer`s side is an effective way to manage TSA agreements with the seller. This agreement has the following advantages: if there are 3-party licenses or outsourcing agreements in support of a TSA, these should be included in the pricing – for example, the cost of the MS Sharepoint license if the buyer opts for TSA support for the seller`s Sharepoint sites. If the license or outsourcing period exceeds the TSA period, renewal costs should also be taken into account in pricing. The pricing structure of TSA services must be clearly defined and structured based on well-measurable metrics – for example. B$ per hour for support staff, MIPS for computing power, $/GB for memory, etc. Each TSA service should be evaluated independently of each other, where possible. Avoid a situation where the price of an ASD service depends on or is linked to another ASD service, making it difficult to terminate individual services without terminating all services….

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