This is the third article in a series related to health care IT M&A phase activities. Part 1 of the series can be accessed here and Part 2 can be found here.
In many acquisitions, particularly an acquisition that is part of a larger organization, the Buyer will need the Seller to continue providing certain services for a defined period of time. This will allow the Buyer to transition these larger organizational services away from the Seller’s systems. This process is often necessary for health care systems that are complex and require time to plan for replacing systems, such as an EMR, imaging, enterprise resource planning or other clinical applications that are not part of the acquisition and need to be replaced. In these cases, a Transition Services Agreement (“TSA”) is necessary to describe the Sellers’s services and applications that they will provide for a period of time. The Buyer should ensure that the TSA addresses the applications that are included and excluded, including the duration of specific services, payment details, dispute resolution, governance and legal terms and conditions that will be in place as the Buyer works to implement their systems.
The Seller typically provides the TSA structure and details which requires a careful review of what the TSA contains. It is paramount that the Buyer ensures they understand their obligations, timeframes, responsibilities and additional costs that the TSA defines.
Reviewing a TSA requires both legal and operational expertise to ensure it is well-constructed with the necessary protections and legal constraints. It must address operational limitations and ensure that TSA services include appropriate systems, governance, timelines and legal terms that are operationally realistic.
A well-written TSA will help ensure both parties understand what services are or are not being provided, what obligations each party needs to perform, define cost requirements and address how disputes will be resolved. Ambiguous or unclear TSAs can lead to unexpected increased costs, longer transition durations and heightened tensions between the Seller and the Buyer teams.
The Hall Render Advisory Services Advantage
Hall Render and Hall Render Advisory Services are uniquely positioned to provide a comprehensive review on how to best structure a TSA by both the Legal and IT requirements to ensure the Buyer is successful.
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If you have any questions, please contact:
- John Norling at jnorling@hallrenderas.com or (214) 615-2010; or
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Hall Render and Hall Render Advisory Services blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
