TSA after a business acquisition: how transitional services, IT, accounting, HR and liability are regulated in a carve-out.
BRANDAUER Rechtsanwälte
Salzburg law firm for corporate, company and transaction law
Every transaction is handled by a coordinated team of lawyers, legal staff and specialists. In company acquisition matters we look at structure, contract, tax and liability together.
After closing, the target business is not always immediately able to operate independently. In carve-outs in particular, IT, accounting, payroll, procurement or logistics may still depend on the seller group.
A transitional services agreement, short TSA, regulates these transitional services. It creates time for separation without the operating business stalling on the day after closing.
This topic differs from the general post on post-closing integration: there the focus is on integration by the buyer. Here the focus is on services the seller must still provide for a limited time.
Check whether operational dependencies on the seller remain after closing.
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Typical dependencies concern IT, accounting, payroll, procurement, warehouse, brand use or central administration.
If the business can operate independently from closing, a broad TSA is often not needed. Handover protocols, access credentials, documentation and contacts for short follow-up questions remain useful.
Still check whether individual IT or administrative accesses are separated only after closing.
If scope, term and exit plan are clear, the TSA protects both sides. The buyer receives operational security and the seller limits its continuing service obligations. Measurable services, fixed contacts, escalation and a clear end date are important.
The arrangement should be aligned with closing conditions and the integration plan.
If central services are described only generally, the buyer can remain dependent on seller systems and staff after closing. Clarify before signing which services are truly needed and how the technical exit will occur.
Without a separation plan the TSA should not be treated as a side document.
A TSA can cover IT operations, email, accounting, payroll, tax data, procurement, customer service, warehouse, quality management or use of certain brand elements. What matters is not the label of the document but the concrete service without which the target cannot operate stably after closing.
Technical separation is particularly important. Access rights, data, interfaces and permissions must be included in a plan. Data protection and confidentiality must be considered. More detail is provided in the post on data protection due diligence.
The term should be as short as possible and as long as necessary. Three to six months may be enough for simple services, complex IT or carve-out projects often need more time. What is binding is not a rule of thumb but the specific separation plan.
Fees can be cost reimbursement, fixed fees or stepped charges. The seller should not owe an unlimited service operation and the buyer should not face surprising additional costs. Service levels, response times and escalation routes prevent disputes.
A good TSA describes not only services but also end date, costs and responsibility.
| Point | Meaning | Contract solution |
|---|---|---|
| Service scope Service scope | Concrete services not generic label | Unclear expectations |
| Term Term | Fixed end date with exit plan | Permanent dependency |
| Fees Fees | Transparent cost logic | Later additional costs |
| Service level Service level | Measurable quality | Dispute on performance |
| Liability Liability | Limitation and escalation | Unlimited service risk |
Caution with carve-outs: Without a TSA the buyer may acquire a business that is not yet technically separated from the seller. Review IT, accounting and access rights before signing. A TSA does not replace a separation plan, it only accompanies it.
The TSA should not stand isolated next to the company purchase agreement. It must fit closing conditions, warranties, data protection rules, confidentiality and purchase price. If a central transitional service is not available, this may be a condition to closing.
In practice, an annex with services, term, fees, responsible persons and exit milestones is useful. It reduces room for interpretation and helps the handover to operational teams.
No. A TSA is needed mainly where the target business still depends on seller group services after closing.
The term depends on the separation plan. It should allow a realistic transition but should not create a permanent dependency.
The agreement should regulate service levels, escalation, withholding rights and liability limits. Without these points enforcement is difficult.
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