Carve-Outs & TSAs: Exiting Cleanly and On Time
Corporate carve-outs and divestitures look simple on a board slide: sell a business, bank the proceeds, move on. In reality, separation is one of the most complex manoeuvres an organisation can attempt. You’re disassembling shared processes, systems, brands, contracts, and people—while continuing to serve customers and hit the quarter. Most carve-outs require Transitional Service Agreements (TSAs) so the seller can temporarily provide IT, finance, HR, facilities, and other services until the buyer stands up its own stack. That clock starts ticking on Day-1, and every overrun erodes value.
This guide is a practical playbook for leaders on both sides of the table who need to exit cleanly and on time. We’ll clarify what TSAs are (and aren’t), how to scope and price them, how to stand up greenfield capabilities at speed, what to prioritise in the first 100 days, and how to govern risk without stalling momentum. We’ll link to adjacent guides for depth—Pre-Merger Strategy, Post-Merger Integration Strategy, The 100-Day PMI Plan, M&A Integration Services, Fractional Leadership Roles, and sector nuances in Software and Life Sciences—so your approach sits inside a coherent system.
Why Carve-Outs Are Harder Than They Look
Shared everything. The divested business rarely has its own ERP, HRIS, payroll, billing, identity provider, or security stack. Everything runs on the parent’s platforms and policies.
Customer continuity under time pressure. The market doesn’t care that you’re separating; it expects zero disruption.
Regulatory and contractual landmines. From data residency to change-of-control clauses, there’s little room for error.
TSA burn. TSAs are convenient but costly; each month of overrun compounds fees and management distraction.
Organisational whiplash. People must serve customers, deliver growth, and migrate to a new operating model simultaneously.
A disciplined plan anchored in pre-merger strategy and executed through a 100-day plan is the difference between a value-creating exit and a year of firefighting.
See also: Pre-Merger Strategy: Setting the Stage for Integration and The Post-Merger Integration 100-Day Plan for sequencing and artefacts.
TSA 101: Purpose, Scope, and Pricing
What a TSA is: a contractual arrangement where the seller provides agreed services (e.g., IT, finance, HR, facilities, supply chain) to the buyer for a defined period after close, with service levels and fees.
What a TSA is not: a license to defer decisions. TSAs buy time—but they also burn cash and limit autonomy.
Common TSA Towers
IT & Security: identity/SSO, email, endpoint, hosting, networks, helpdesk, ERP/CRM/HRIS, service management.
Finance: AP/AR, GL, treasury/banking, tax, payroll, close and reporting.
HR: core HR, recruitment, learning, benefits administration.
Commercial Ops: order management, pricing tools, CPQ, billing, collections.
Operations & Facilities: site services, EHS, logistics coordination.
Regulatory/Quality (sector-specific): QMS, PV, batch release (life sciences); compliance controls (financial services).
How to Scope TSAs Well
Minimum viable scope. Provide only what’s essential to run BAU safely. Over-scoping creates dependency and delays.
Explicit SLAs & SLOs. Define uptime, response, and resolution targets; include reporting cadence and service credits for misses.
Transparent pricing. Cost-plus with defined overheads and rate cards. Beware “black-box” allocations that spike unexpectedly.
Exit criteria & milestones. For each tower, specify the landing zone and the objective signal that the TSA can switch off (e.g., “first independent payroll run completed; dual-run completed with X% variance threshold”).
Access & data boundaries. What data is shared, for how long, and how is it secured and purged?
Change control. Who approves changes that affect service or cost? Tie to a joint Separation Management Office (SMO).
For governance design, see Post-Merger Integration Strategy: Designing for Value Creation.
The Separation Management Office (SMO): Your Engine Room
Carve-outs succeed on cadence and clarity. Stand up an SMO (or extend your IMO) before close:
Charter & authority: decision rights for TSA scope, spend, priorities, and risk acceptance.
Workstreams: IT/Security, Finance, HR/People, Commercial/GTM, Operations/Supply Chain, Legal/Regulatory, Comms.
Benefits & burn model: dashboard showing TSA burn-rate, exit progress, one-off separation costs vs budget, and run-rate savings.
Rituals: weekly workstream stand-ups, fortnightly steering with executives, 24–48h expedite lane for customer-impacting issues.
Decision log & dependency map: avoid re-litigating choices; surface cross-tower blockers early.
If bandwidth is thin, use M&A Integration Services to provide the SMO “spine” and add fractional CFO/CTO/COO to own decisions, not just advise.
Design Principles: Exit Cleanly, Not Just Quickly
Interoperate → migrate → decommission. Start with secure interoperability (e.g., SSO, data feeds), then migrate, then switch off.
Land the critical path first. Prioritise identity, email, finance, payroll, billing, and customer support. Without these, you can’t operate.
Dual-run where it matters. Payroll, billing, and close processes should run in parallel for at least one cycle with reconciliation gates.
Protect customers and revenue. No billing surprises, no entitlement losses, clear price-protection windows.
Document as you go. Separation increases key-person risk; capture runbooks and handovers continuously.
Measure burn-down publicly. A visible TSA burn chart focuses minds and shortens debates.
These principles echo the cluster’s cadence—100-day planning, integration services, and PMI strategy.
Standing Up the Greenfield Stack (Fast)
Identity & Access (Day-1 Critical)
New tenant & directories. Create an independent identity domain with MFA and conditional access.
SSO bridges. Federate to seller systems where allowed; limit privileged access; log everything.
Joiners-Movers-Leavers. Stand up JML processes on Day-1; you will be hiring and reshaping teams rapidly.
Collaboration & Email
Provision email and collaboration suites (O365/Google Workspace). Migrate mailboxes in waves with clear blackout windows and fallback.
Endpoints & Device Management
Enrol devices to the new MDM as soon as practical; standardise baseline configurations and encryption.
Finance Stack
Banking & treasury: new accounts, signatories, and policies.
ERP (minimum viable): GL, AP/AR, fixed assets, order management. Start lean; avoid multi-year implementations during separation.
Close calendar: define Day-1 close cadence with reconciliation to seller books.
Payroll & HRIS
Set up a HRIS with core HR, time/attendance, and benefits admin.
Payroll dual-run for at least one cycle; communicate deductions and banking changes early.
Commercial: Order-to-Cash & Billing
If possible, retain existing billing for a short dual-run; otherwise, mirror terms, taxes, and entitlements meticulously.
Build migration tooling for entitlements and price lists; apply price-protection for a defined window.
IT Service Management
Stand up a basic ITSM (tickets, CMDB lite, change) and helpdesk.
Publish a customer-impacting change freeze calendar until critical migrations are past.
For software-heavy businesses, cross-reference Software Industry M&A: Capturing Synergies (billing/entitlements are common failure points). For GxP environments, see Life Sciences M&A on validation and QMS bridges.
The 100-Day Separation Plan (Sequenced)
Weeks 1–4: Stabilise
Execute Day-1 checklists (access, payroll, billing continuity) and publish “what changes/what doesn’t” to employees and customers.
Confirm TSA inventory with costs and exit dates; start burn chart.
Launch top-account outreach (revenue defence), with a named exec owner.
Weeks 5–8: Align & Pilot
Complete identity + email migrations for priority users; begin device enrolment.
Dual-run payroll; reconcile variances; schedule full cutover.
Pilot billing migration for a small cohort; verify invoices, taxes, and entitlements end-to-end.
Implement finance close on the new GL with seller reconciliation.
Weeks 9–14: Commit & Execute
Cut over payroll and banking; retire TSA payroll services.
Expand billing migration in waves; monitor disputes and SLA adherence; keep price-protection live.
Exit ITSM/helpdesk and email TSAs; switch to your helpdesk and support numbers.
Publish first realised vs plan cost and TSA exit metrics to the board.
For cadence and artefacts, pair with The Post-Merger Integration 100-Day Plan.
Legal, Regulatory, and Data Boundaries
Gun-jumping/antitrust. Use clean teams for competitively sensitive data pre-close.
Data residency & privacy. Map PII and location; apply DPA and SCCs where required; plan regional data stores if necessary.
IP & licensing. Confirm rights to software, content, trademarks; issue new license keys and domain names.
Contracts. Track novations/assignments and change-of-control clauses; maintain a commitments register.
Sector specifics. In life sciences, ensure PV case routing, QMS bridging, and batch release continuity; file required variations with agencies.
Communications: Narrative as a Control System
Employees. Weekly updates for the first month, manager kits, and a single self-service hub for FAQs and timelines.
Customers/Partners. Day-1 letter, QBRs for top accounts, support continuity statements, price-protection pledge, migration calendar.
Board/Investors. TSA burn-down, exit milestones, realised vs plan, risk radar.
Tie communications to real progress—milestones over promises.
Metrics That Matter
TSA & Cost
TSA burn-rate vs plan; % services exited; cost per service-month.
One-off separation cost variance; run-rate cost to serve (pre vs post).
Continuity & Revenue
NRR/GRR; billing accuracy; dispute rates; DSO; SLA adherence; incident MTTR.
Execution & Risk
Milestone on-time %; decision cycle time; expedite lane throughput; high-severity incidents.
People
Retention of critical roles; time-to-hire for gap roles; onboarding throughput; engagement pulse.
Controls
Audit exceptions; access recertification completion; privileged access hygiene.
Common Failure Patterns (and Better Moves)
Under-scoped TSAs that hide critical services
Better: cross-walk processes → systems → data → people; validate with the operators, not only the deal team.Big-bang billing migrations
Better: pilot cohorts; dual-run; embed dispute triage; publish price-protection.Payroll cutover without dual-run
Better: parallel cycle with reconciliation gates; contingency funds for corrections.Identity left to last
Better: new tenant + SSO bridges in Weeks 1–4; log and limit privileged access.Gold-plating the greenfield ERP
Better: minimum viable ERP for separation; enhance post-exit. Do not start a multi-year transformation mid-carve-out.TSA complacency
Better: public burn chart, exit milestones in the steering pack, and service credits for misses.Knowledge trapped with a few heroes
Better: document runbooks, decisions, and handovers; require artefacts in every exit.
Mini-Cases (Composite)
A) Clean IT/Finance Exit in 120 Days
A carve-out had IT/Finance TSAs with a 120-day window. A fractional CFO implemented a close calendar, AP/AR, and a benefits tracker in 30 days; a fractional CIO stood up identity/email, a minimal ERP, and ITSM. Payroll dual-ran in month two; billing migrated in three waves. All TSAs exited on time; DSO improved by eight days by month four.
Read with: Fractional Leadership Roles, M&A Integration Services.
B) Billing First vs Identity First (Software)
A PE buyer prioritised billing migration before identity; entitlements mismatched, generating support escalations and churn. In a later deal, they reversed the order—identity and telemetry first, then staged billing with incentives. NRR held above 110% during exit.
Read with: Software Industry M&A: Capturing Synergies.
C) GxP-Sensitive Separation (Life Sciences)
A pharma carve-out preserved QMS and PV via bridging SOPs and joint councils. ELN/LIMS were federated read-only until study phases allowed re-validation. Batch release and PV continued with zero inspection findings. TSA exits were sequenced around PPQ and stability windows.
Read with: Life Sciences M&A: Capturing Synergies Without Losing Innovation.
Buyer vs Seller: Aligning Incentives
Buyer priorities: autonomy, speed, predictable cost, and no customer disruption.
Seller priorities: risk containment, cost recovery, minimal distraction to core.
Win-win mechanics
Milestone pricing that tapers as services exit.
Service credits tied to SLAs; change control for scope creep.
Transparent reporting and joint steerco decisions on trade-offs.
BOT option (Build-Operate-Transfer): seller (or a partner) helps build the buyer’s landing zone, operates it, then hands it over.
The Carve-Out Artefact Pack (What You Must Produce)
TSA Catalogue with scope, SLAs, pricing, exit criteria, and owners.
Separation Blueprint: process → system → data → people mapping per tower.
Landing Zone Designs for identity, email, ERP/HRIS, ITSM, billing, data.
Cutover Playbooks (identity, payroll, billing, close, service desk) with go/no-go gates and rollback plans.
Benefits Tracker (TSA burn, separation one-offs, post-exit run-rate) reconciled with finance.
Risk & Commitments Register (regulatory filings, data purges, customer promises).
Comms Kits (employees, customers, partners, media) with timelines and FAQs.
Handover Docs for every TSA exit (runbooks, admin accounts, configs, licenses).
How This Fits the Cluster (Internal Links)
Set the groundwork in Pre-Merger Strategy: Setting the Stage for Integration.
Use Post-Merger Integration Strategy to define governance, decision rights, and sequencing.
Drive momentum with The Post-Merger Integration 100-Day Plan.
Augment capacity with M&A Integration Services and targeted Fractional Leadership Roles.
Tailor the approach with sector nuance from Software Industry M&A and Life Sciences M&A.
Keep the end in sight with Post-Merger Integration Success: Turning Deals Into Lasting Value.
Final Thoughts
A clean carve-out is not about heroics—it’s about architecture, sequencing, and governance. Scope TSAs tightly, publish exit criteria, and make the burn visible. Stand up a minimum viable operating stack fast (identity, email, finance, payroll, billing, helpdesk), dual-run the sensitive flows, and protect customers with disciplined communication and price-protection. Pair a strong SMO with fractional leadership where decision-making and pattern knowledge matter most, and measure everything through a finance-grade benefits tracker.
Handled this way, a carve-out becomes a short, focused sprint to autonomy—not a year-long drag on value.
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