Transition services agreement
An agreement for temporary support from the seller to the buyer or divested business after a transaction. Services may include payroll administration, IT or other functions while replacement arrangements are established; the agreement specifies scope, fees and duration.
Transition services agreement in round numbers
Hypothetical: a seller provides payroll administration and IT support for twelve months at a constant fee of US$200,000 per month. With no extensions or extra charges, total service fees are 12 × US$200,000 = US$2.4 million. These are support-service fees, separate from employee wages and other underlying payroll amounts. Providing payroll administration does not mean the seller bears those wages.
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| Assumption or result | Amount |
|---|---|
| Monthly service fee | US$200,000 |
| Agreed duration | 12 months |
| Total service fees | US$2.4 million |
Terms Related to Transition services agreement
Carve-out · Divestiture · Post-merger integration · All of the glossary