TSA Pre-Signing Review
Run a four to six week TSA diligence sprint. Specialist work.
Fixed-fee proposal in 48 hours. Senior team on day one. The first conversation is always free.
TSA diligence timeline and team structure determines whether the buyer arrives at signing with a defensible TSA scope and cost model or with vague comfort that the TSA will work out. The work runs inside the broader TSA due diligence practice and parallels the QoE, the commercial diligence, and the operational diligence streams. A standard buyer-side TSA diligence sprint takes four to six weeks and is staffed by a small senior team. This article walks through the week by week sequence and the staffing model that consistently delivers the required output inside the deal timeline.
Week one establishes the diligence scope and pulls the initial data room materials. The buyer-side advisor reviews the deal context, the seller's information memo, the management presentation, and the draft TSA if one is available. The advisor builds the diligence question list and submits the initial data request to the deal counsel for relay to the seller.
Initial data requests typically cover the seller's draft TSA and Separation Agreement, the seller's TSA cost build, the service catalog with line item detail, the system inventory, the major vendor contracts, the historical IT spend allocation, the historical SLA performance, and any prior TSA experience the seller has with similar carve-outs. The buyer-side advisor flags which items are first wave versus second wave so the seller does not push back on volume.
Kickoff with the deal team happens by end of week one. The deal lead, the buyer's eventual operating partner or CIO, the legal advisor, and the QoE advisor align on the interfaces between workstreams. The TSA diligence stream needs the QoE work product to validate cost allocations and the legal stream to align on TSA contract language.
Week one output. Scoped diligence plan, initial data request submitted, kickoff complete, dependencies aligned with other workstreams. The work pairs with the TSA diligence checklist.
Week two concentrates on the service catalog and the pricing model. The buyer-side advisor reconstructs the catalog from the seller's documentation and from the seller's procurement, IT asset, and HR system exports. The reconstruction usually reveals 30 to 50 percent more line items than the seller's catalog originally showed.
The pricing model gets a structured review. Is the model cost-plus or fixed-fee? What allocation method is used? What mark-up percentage? How are volumes baselined? How does pricing respond to volume changes? How are pass-through costs defined? How are extension fees calculated? The buyer-side advisor benchmarks the model against industry norms.
Mid week two, the buyer-side advisor briefs the deal team on the initial findings. Where the catalog has gaps, where the pricing model has soft spots, where the pass-through definitions are too broad. The deal team uses the briefing to set the redline priorities. The seller usually delivers the second wave of data room materials in response to week one requests.
Week two output. Reconstructed catalog, pricing model analysis, initial redline priority list, deal team brief delivered. The work pairs with TSA cost modeling in diligence.
Week three covers the management presentation and the vendor diligence deep dive. The buyer-side advisor leads the TSA portion of the management session, asking the specific questions that the seller's deck did not answer. Catalog scope, pricing math, exit terms, governance, vendor dependencies, and red flags.
In parallel, the vendor diligence stream runs through the major third-party contracts. Assignability classification, consent risk, pricing step up estimation, and Day One vendor list construction. The two streams feed each other. Vendor specifics surfaced in the management session feed the contract review. Contract terms surfaced in the contract review feed follow up questions for the seller.
Week three is also when the IT diligence stream completes the system inventory and dependency mapping. The output is a tiered system list with stand-up cost estimates and exit timeline implications. The deal team's investment professionals incorporate the IT findings into the deal memo at this stage.
Week three output. Management session complete with documented follow ups, vendor risk register, completed system inventory, deal memo updates. The work pairs with TSA management presentation questions.
Week four consolidates the findings into the TSA cost model and drafts the redline package. The cost model presents the TSA monthly bill, the Day One operating cost, the standalone steady state cost, and the separation capital. Each layer is supported by line item detail that traces back to the diligence work product.
The redline package translates the diligence findings into specific changes to the seller's draft TSA. Catalog additions to fill the gaps. Pricing structure changes to harden cost-plus formulas. Pass-through definitions that limit the cost base. Governance language that establishes decision rights and escalation paths. Exit obligations that commit seller support for migration. Termination clauses that protect buyer flexibility.
The redline package goes through the deal counsel before it reaches the seller. The buyer-side advisor sits in on the legal team's review and ensures the commercial intent of each redline is preserved through the legal drafting. The deal team also reviews the redline against the broader deal economics, ranking changes by impact and likely seller acceptance.
Week four output. Complete TSA cost model, redline package drafted, legal team reviewed, deal team prioritized for negotiation. The work pairs with TSA pre-signing leverage.
Weeks five and six support the active negotiation between buyer and seller. The buyer-side advisor sits behind the deal counsel during TSA negotiation sessions, providing real time analysis of seller pushback. Where the seller resists a redline, the advisor either reinforces the commercial rationale or suggests an alternative that preserves the buyer's economic position.
In parallel, the buyer-side advisor builds the Day One plan. Tier 1 system stand-up tasks, Day One vendor relationships, identity migration, banking and treasury setup, payroll readiness, insurance binding, and any other Day One critical items the diligence surfaced. The plan becomes the operational blueprint for the period between signing and Day One.
By end of week six, the TSA is either signed or signing has slipped. If signed, the buyer-side advisor produces a final TSA review report that documents the as signed terms, the residual risk, and the operating playbook for the TSA period. If signing has slipped, the advisor continues negotiation support until the deal closes.
Weeks five and six output. Negotiated TSA, Day One plan, final TSA review report, operating playbook for the TSA period. The work pairs with Day One readiness.
A buyer-side TSA diligence team is small. A typical mid-market carve-out is staffed by a senior TSA specialist as the lead, one IT subject matter expert, one finance subject matter expert, and a senior analyst for cost model construction. Large-cap carve-outs may add a second IT specialist focused on ERP separation and a separate vendor diligence lead. Total team size rarely exceeds five people including the lead.
Seniority concentrates at the top. The TSA specialist lead is involved in every session, every work product, and every deal team brief. Diligence is judgment intensive. Junior staff can support data extraction and analytical work but cannot make the commercial calls that the lead delivers to the deal team. Buyer-side firms that staff TSA diligence with primarily junior teams produce inconsistent output and miss issues.
The engagement model is Fixed Fee or Portfolio Retainer. Fixed Fee covers a single deal scoped during intake. Portfolio Retainer covers PE platforms with a consistent diligence method applied across multiple deals at predictable cost. Neither model uses hourly billing because hourly billing creates the wrong incentives in time pressured work.
The team coordinates closely with the deal team. The TSA specialist sits with the deal lead in regular check ins through the engagement and the team is on call for ad hoc questions as the deal evolves. The work pairs with the TSA diligence checklist.
The buyer-side checklist for catalog, pricing, governance, and exit before the term sheet hardens.
Read the article →The questions a buyer-side TSA specialist asks management before pricing locks in.
Read the article →Build the base case, extension case, and stranded cost overlay the deal team can defend in investment committee.
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Fixed-fee proposal in 48 hours. Senior team on day one. The first conversation is always free.
Seven buyer-side moves to exit a Transition Services Agreement on time and below budget. The mark-up, the extension-fee curve, exit sequencing, and the 11-month calendar.
On a representative $48M-revenue carve-out, the CIM models the TSA at $4.2M. Read in diligence — separation scope tested, draft TSA red flags caught, stranded cost sized — the true cost lands at $6.8M. That $2.6M gap is set before signing, and it is only visible to the buyer who reads the separation in diligence rather than discovering it in delivery.
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