TSA exit cost benchmarks are the buyer's first lever.

What the benchmark is and is not.

A TSA exit cost benchmark is a defensible range for the monthly cost of each workstream, by carve-out size and complexity. The benchmark is not a price list. It is a range with explicit assumptions. Inside the range, the seller's number is reasonable. Above the range, the seller is leaving room to negotiate. Below the range, the buyer should expect quality issues or hidden costs elsewhere.

The benchmarks here reference a mid-market carve-out with annual revenue of $200M to $1.5B, an 18 month TSA, and a standard service catalog. Larger carve-outs scale up. Smaller carve-outs do not scale proportionally down. A $50M carve-out often pays close to a $200M carve-out for IT services because the seller's fixed cost is the same regardless of buyer size.

Benchmarks are published in ranges, not points, because every TSA is different. The variance comes from system complexity, geographic spread, and the seller's allocation methodology. A benchmark that ignores variance is misleading. A benchmark that explicitly bounds it is useful.

The ranges below are designed to be conservative on the low end and realistic on the high end. Most sellers price within the middle two thirds of each range. Outliers in either direction warrant scrutiny.

IT and applications. The largest line item.

IT and applications is almost always the largest single workstream by cost and the slowest to exit. Monthly TSA cost ranges from $80K to $600K for a mid-market carve-out, depending on system count, integration complexity, and geographic spread.

The largest cost drivers are ERP hosting, identity and access management, network operations, and end user computing. ERP hosting alone can be $40K to $250K per month on a large platform. Identity is typically $10K to $40K. Network and security operations together run $20K to $100K.

Pass-through items in IT are common sources of overcharge. Software licences allocated by user count, when the seller is using vendor list price rather than its own enterprise rate. Data centre allocations based on the seller's loaded cost, which includes overhead the buyer does not consume. Cloud charges that include the seller's volume discount as a reseller mark-up.

IT separation is the workstream where buyers most often discover they are paying for things they will never use. A line by line audit during pre-signing is the highest leverage piece of work in any TSA review.

Finance, HR, and procurement. The mid tier workstreams.

Finance and accounting. Monthly TSA cost ranges from $30K to $150K. Cost drivers are general ledger hosting, accounts payable processing volume, accounts receivable processing, financial reporting support, and tax provision support. Sellers often bundle these into a single line item. Unbundling them is the first move in renegotiation.

HR and payroll. Monthly TSA cost ranges from $25K to $120K. Cost drivers are payroll processing volume, benefits administration complexity, employee record management, and time and attendance integration. Per employee per month metrics are useful here. A typical range is $40 to $120 per employee per month for the full HR and payroll bundle.

Procurement. Monthly TSA cost ranges from $20K to $100K. Cost drivers are source to pay system hosting, contract management support, vendor master maintenance, and purchase order workflow. Procurement TSAs often hide stranded cost in vendor contracts that name the seller as the contracting party. The buyer pays for procurement support and pays again to migrate the contracts.

Each of these mid tier workstreams should be priced separately, with separate exit dates and separate service levels. Bundled pricing favours the seller because it obscures the per service economics.

Treasury, tax, and legal. The smaller workstreams.

Treasury and cash management. Monthly TSA cost ranges from $10K to $50K. Cost drivers are bank account maintenance, payment file processing, cash forecasting support, and intercompany settlement administration. Treasury is usually the first workstream to exit because the dependency on the seller is operationally low once the Newco has its own banking relationships.

Tax. Monthly TSA cost ranges from $15K to $80K. Cost drivers are tax provision processing, transfer pricing administration, and indirect tax compliance support. Tax is often under priced in the initial draft because sellers under estimate the work involved in transition pricing and statutory filings.

Legal and corporate entities. Monthly TSA cost ranges from $5K to $40K. Cost drivers are statutory filing support, entity maintenance, and board governance administration. Legal is rarely the workstream where the dollars are. It is often the workstream where the timing matters most, because legal filings have firm regulatory deadlines.

The smaller workstreams are easy to under attend. They are also easy places for the seller to add 10 to 30 percent to the price without buyer pushback. A line item audit catches this. A bundled price never does.

Mark-up and pass-through, where the negotiation sits.

Mark-up benchmarks. Cost-plus pricing in a TSA typically carries 5 to 15 percent mark-up. Sellers often open at 15 to 20 percent. Buyers should expect to settle between 7 and 12 percent for standard services. Premium services with high transition team intensity can justify 12 to 18 percent. Anything above 20 percent should be challenged directly.

Pass-through items. The seller charges the buyer at the seller's cost, in theory. In practice, pass-through items often carry an embedded mark-up or include the seller's overhead allocation. Software licences are the largest single source. The seller pays vendor enterprise rate and bills the buyer at vendor list rate. The differential can be 30 to 70 percent depending on the vendor.

Allocated cost. Where the seller passes through a share of internal infrastructure cost (data centre, network, security operations), the allocation methodology matters more than the dollar figure. A per user allocation can over count a Newco that uses the system less than the parent. A per transaction allocation rewards efficiency. Buyers should ask for the allocation methodology in writing and check it against actual consumption.

The benchmark conversation almost always lands within a 20 to 30 percent range on aggregate TSA cost. The work that produces the saving is the line by line audit and the explicit conversation about each mark-up and each pass-through item.

How to use the benchmarks in negotiation.

The benchmarks are most useful before signature. The buyer presents the range, asks the seller to justify any number that sits at the high end, and uses the ranges to anchor specific counterproposals. Sellers rarely accept the buyer's exact number, but they often move into the middle of the range when the range is presented with the underlying assumptions.

Post-signature, the benchmarks are useful in mid-TSA renegotiation. A workstream priced above the range with no compelling justification is a candidate for amendment. The buyer's case is stronger when it can demonstrate that the asking price exceeds what comparable carve-outs across industries are paying.

The benchmarks are also useful in extension fee negotiations. A seller charging extension fees on a workstream that was already priced at the high end of the range has less leverage than a seller whose base price was at the low end. Buyers who have done the benchmarking pre-signing carry the data forward into every subsequent conversation.

A working benchmark file is the single most reused artefact in TSA negotiation. Build it once, update it across multiple carve-outs, and reference it every time the seller proposes a price.

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