In a carve-out, all eyes are on the SPA. Yet another contract shapes the buyer’s daily life for months. It is the Transitional Service Agreement (TSA). Under it, the seller keeps providing services, mostly IT, to the divested entity after closing, against monthly fees. Well negotiated, the TSA buys the time needed to build autonomy. Poorly managed, it becomes an annuity for the seller. Thus, TSA exit is the real finish line of the deal.
Negotiating: scope, price, duration, exit
Four parameters matter. First, the scope: list the services precisely, from applications and infrastructure to support and security. Indeed, the seller reads anything vague restrictively. Second, the price: prefer transparent unit costs over lump sums. That way, every service you exit reduces the invoice. Third, the duration: negotiate an initial term aligned with a realistic separation plan. Add extension options you hope never to use, because their price is where the seller builds in the incentive to leave. Fourth, the exit terms: partial-exit rights service by service, reversibility assistance, and data handover obligations.
One rule underpins the rest. You can only negotiate a TSA well if you know your dependencies. That is precisely what IT due diligence establishes before signing. Indeed, a buyer who discovers dependencies after closing negotiates on the seller’s terms.
Monitoring: the TSA is a program, not a subscription
Once signed, the TSA needs governance of its own. Concretely, that means a service inventory with an owner and an exit date per line. It also means monthly reviews with the seller, service-level tracking and an escalation path for disputes. Without it, the TSA fades into the background. The invoice keeps arriving, and no one owns the exit.
TSA exit: the real finish line of the carve-out
TSA exit is not an administrative formality. It is the moment the entity proves its autonomy. Each service exit is a mini-project. First, build or buy the target capability. Then migrate and test. Finally, terminate the service formally and check that the invoice actually drops. The sequence matters. For example, exiting the workplace platform before the identities that support it is a classic and costly mistake.
Every month of TSA avoided is a direct gain. On a mid-size carve-out, TSA fees commonly run into six or seven figures per year. Thus, the business case for disciplined exit management writes itself.
The takeaway
The TSA deserves the same attention as the SPA. Negotiate it on facts established by due diligence. Govern it like a program. Then exit it service by service against a plan. Indeed, this is one of the central responsibilities of the carve-out program director.