Mergers and acquisitions (M&A) are supposed to feel like a grand finale, the check clears, the champagne pops, and the sellers ride into the sunset. But anyone who has lived through a deal knows the finish line is messier than the term sheet suggests. Between signing and Day 1, there’s a nerve-racking stretch where the carved-out business still leans on the seller’s systems, people, and institutional memory. That limbo is where a Transition Service Agreement, yes, the dreaded TSA, steps in. Love it or hate it, a TSA is often the only thing standing between a smooth hand-off and an operational face-plant.

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What on Earth Is a TSA, Anyway?

A TSA is a contract in which the seller keeps the lights on for the buyer, literally and figuratively, for a defined period after closing. The seller continues to provide select services (IT, finance, HR, payroll, supply chain, you name it) while the buyer scrambles to replicate or migrate them. Think of it as renting your old apartment from the person who just bought it while you wait for your new place to finish renovations. Clunky? A little. Necessary? Absolutely.

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The Gap Between Signing and Separation

Even well-run companies underestimate how tangled their operations are. Core applications sit on shared servers, plant utilities run through a single meter, and the payroll team cuts checks for both the carved-out division and the legacy business. Yanking those threads out overnight would unravel the sweater. A TSA buys time, nothing more, nothing less, so each side can detangle the knot without shredding value.

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Top Reasons You Shouldn’t Skip a TSA

Operational Continuity: Keep the Lights On

The first week after closing is no time for production lines to grind to a halt or customer invoices to vanish in a black hole. A TSA keeps the workflow humming while new stand-alone processes are built. You rarely hear applause for “things working as they should,” but you’ll sure catch heat the minute an ERP connection dies.

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Data, Systems, and People: The Hidden Web

Most carve-outs run on shared ERPs, intranets, and data centers. They also rely on finance teams who know which accrual goes where and HR reps who remember why a certain legacy bonus plan exists. A good TSA outlines not only which services stay online but who delivers them, because code and hardware are useless without the human operators.

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Protecting Deal Value

You bought (or sold) a business for synergies, market share, or margin uplift, not to watch EBITDA dribble away in the first quarter. Interruptions in supply chain, customer service, or billing can erode revenue rapidly. A TSA guards the economic thesis by locking in service-level agreements (SLAs) and back-to-back accountability. If the seller fails to meet performance metrics, penalties kick in, motivating everyone to hold the line.

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Optional Bullet Points: Where a TSA Packs the Most Punch

• IT infrastructure and help desk
• Finance and accounting close cycles
• HR administration and payroll
• Procurement and vendor management
• Regulatory reporting

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Common Gripes About TSAs, And Why They’re Overblown

“They Drag On Forever”

Yes, poorly scoped TSAs become zombie contracts that haunt both sides. The cure is a crystal-clear timeline with sunset clauses, fee escalations, and milestone gates. When the meter gets more expensive every month, everyone finds motivation to hit the off-ramp.

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“They’re a Money Pit”

Sellers often bill at fully loaded cost plus a margin. Buyers grumble, but recreating an SAP environment overnight is far pricier than paying for caretaker service. Look beyond sticker shock and weigh the alternative: lost orders, missed payroll, and urgent consultants parachuting in at triple time.

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“They Stall Integration”

A TSA is a bridge, not a roadblock. Use the breathing room to blueprint the end-state architecture, run data cleanses, and execute cutovers in phases instead of all at once. Smart buyers treat TSA days like borrowed time, not an excuse to procrastinate.

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How to Draft a TSA Without Losing Your Mind

Start with a Service Catalog, Not Legalese

List every single function, system, and report that will keep flowing post-close. Map the touchpoints: Who provides, who consumes, and what SLA applies. The legal language can’t protect you from a service you forgot to include.

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Set Governance and Escalation Paths Early

Appoint deal captains on both sides, schedule weekly “traffic-light” reviews, and define escalation triggers. When a payroll file is late, the issue should rise to the right executives in hours, not days.

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Keep the Clock Ticking

Insert step-down fees or escalation clauses that ratchet up the cost if services linger beyond agreed milestones. Money talks, especially when competing priorities threaten to drag the timeline.

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Mind the Data Exit

Plan for data migration up front: formats, field mappings, regulatory retention rules, and secure hand-offs. The last thing you want is to realize in month eight that historical sales data is stuck on the seller’s server behind an expired VPN.

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Bake in Knowledge Transfer

The seller’s accountants, engineers, and HR reps carry institutional knowledge that manuals can’t capture. Schedule shadow sessions, record process walk-throughs, and stagger departures so tribal wisdom doesn’t evaporate the day the TSA expires.

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Closing Thoughts

Nobody daydreams about drafting a Transition Service Agreement. It’s administrative, it’s tedious, and it forces two parties who just negotiated like gladiators to collaborate a while longer. Yet skipping a TSA or treating it as an afterthought can wipe out the very value your mergers and acquisitions (M&A) deal set out to create. Think of a TSA as the seat belt you click before merging onto a busy highway: you hope nothing goes wrong, but you’d be reckless to drive without it. Handle the scoping, governance, and timeline with care, and the TSA that everyone loves to hate will quietly do its job, keeping operations smooth while the newly combined business hits the accelerator toward its post-deal future.