Why M&A Plays

Handover & TSA Exit

De-risk a transaction while enabling business. TSAs area necessary overhead, and it’s in the interests of buyers and sellers that their use should be minimized.

About the play

TSAs are used to help de-risk a transaction while enabling business. They are viewed as a necessary overhead, and it’s in the interests of buyers and sellers that their use should be minimized. The seller is usually not in the business of providing services to third-party organizations and would like to avoid becoming a service provider for the divested entity. Additionally, the seller is unable to move until other strategic initiatives while assets and staff continue to be tied up in providing TSA services. As a result, there needs to be a strong and continued push on the sellers side to look for an early exit from the agreement.



Executive sponsor, separation manager and deal team




Meeting Agenda, Whiteboard, Strategy Documents


Spend one day or more to prepare materials for a two hour play.

Running the Play:


Define the Operating Model at TSA Exit

The Operating Model at TSA exit represents the divested business isolated from the seller and integrated with the Buyers operations. The purpose is to have a ‘blueprint’, strategy and high-level goals. This should create a shared focus and motivation on both sides to make it happen in the shortest possible timeframe.


Budget the Cost to Exit the TSA

It’s common for the buyer (but not always) to pay for the costs to separate the business. While there may have been early estimates on the cost to complete separation, this is the time to firm up these estimates and provide the buyer with the information it requires so funding can be approved. Early approval will help expedite separation efforts with resources allocated to do the work.


Finalise TSA Exit Work Plans

Work on TSA exit plans may have started while the TSA was being drafted. They may also have been further refined during the signing and closing period. These exit plans need to be finalized with costs and resources assigned as soon as possible after close. Any delay only prolongs the TSA period to the detriment of  both the buyer and the seller.


Kickoff Plans to Exit from the TSA

Under the auspices of the shared governance structure, the program of work to separate and exit the TSA is kicked off. This means resources have been assigned, review meetings in place and tracking of the work is operating and being reported.


Establish a Plan and Approach for Data Migration

The migration of data from the seller to the buyer’s environment can be a significant headache. The migration of data can become complex and messy when the buyer's application environment has a different architecture and business rules compared to the seller. The seller may be tempted to provide a flat-file and give it to the buyer to work out how it should be loaded into its own systems. However, this doesn’t necessarily solve the buyers problems and will instead look for help from the seller for the smooth transition both parties seek.

Data Migration Plan
Data Migration Plan

The migration of data may fall out of the divestiture scope and the sellers responsibilities unless it was specifically agreed in the TSA. Nonetheless, it needs to be agreed where responsibilities lie. Data migration is often a detailed exercise requiring skilled resources. To avoid any nasty surprises that could threaten the TSA timeframe, early review of the data migration challenges is required.


Commence Post-TSA Wind-Down Planning

Wind down activities will need to start as soon as the buyer has exited from a TSA service. This can include:

  1. Redeployment of staff providing the TSA service
  2. Removal of software licenses and termination of vendor contracts
  3. Retirement of applications
  4. Decommissioning of servers and networking infrastructure
  5. Termination of leases on-premises
  6. Commence a program to eliminate Stranded Costs  

It is important for the seller to proactively remove costs that impact the ongoing profitability. Stranded costs, as they are commonly called, are operating costs that continue to remain after the divestiture. A stranded cost reduction program needs to commence with emphasis in the following areas:

Stranded Cost Reduction Program
Stranded Cost Reduction Program