When the target company is a division of another company

The complexity and risk of the integration increases when the target company is a divestment i.e. a division or unit of another company. Additional steps need to be undertaken and a working relationship agreed that continues beyond deal closure:

• the divested company will need to continue to receive IT services from the selling parent company until it is sufficiently transitioned
• the buyer will need to extract the IT infrastructure and business data of the divested company from the selling parent company (which will require the help of the seller).

The transition services agreement (TSA) establishes how the buyer and seller will work together to effect this transfer between them. It lists the roles and responsibilities of both parties and the schedule of charges payable to the seller for the services they provide. These charges put further pressure on the integration team to complete their work quickly. IBM, for example, calls this the process of replacing "green" dollars (real cash being paid to the seller) for "blue" dollars (their internal recharges for the IT infrastructure).

The TSA will look like an outsourcing agreement, with a scope of services, performance standards, service terms and fees. However, it will differ in three important areas (unless the seller has already outsourced its IT to a third party):

1. the seller is not in the business of providing outsourced services
2. the seller does not want to maintain a long term relationship with the buyer
3. there will probably be no incentive for the seller to provide any more than basic services.

For these reasons, the buyer should take particular care defining the detail of each service and allow each to be terminated when it is no longer required. In this way, the buyer gets what they need only for as long as they need it.