TSA Pre-Signing Review
Pressure-test a distressed TSA before you bid.
Fixed-fee review in 48 hours. Senior team on day one. The first conversation is always free.
A TSA 363 sale closes fast, often in 30 to 60 days, and the debtor estate that signs your transition services agreement may not exist six months later. The buyer who treats a bankruptcy TSA like a healthy carve-out walks into Day One with no provider and no recourse. This is a defining test of your TSA exit strategy, and it starts before the bid is final.
A Section 363 sale transfers assets free and clear of liens, but it does not transfer an operating company in running order. The buyer acquires equipment, contracts, and people only to the extent the order specifies. Everything else, including the shared services that actually kept the business alive, stays with a debtor estate that is winding down. The TSA is the bridge across that gap, and it is being signed by a counterparty whose entire reason to exist is to disappear.
That changes the risk profile completely. In a solvent carve-out, the seller has a balance sheet, a reputation, and a continuing relationship that makes it honor the service catalog. In a 363 sale, the provider is a debtor in possession or a liquidating trustee whose duty runs to creditors, not to your Day One. Service commitments that look firm on paper can evaporate the moment the estate runs out of cash or professionals to staff them.
The buyer who understands this scopes the TSA for fragility from the start. Assume the provider may stop performing, assume the people may leave, and build the agreement and the exit plan around getting off the estate's services faster than a normal carve-out would. Speed is the only real protection a bankruptcy TSA offers.
The first question is authority. A debtor in possession can only bind the estate to a TSA if the bankruptcy court approves it, usually as part of the sale order or a separate motion. Verify that the TSA is an approved obligation of the estate, not a side letter the buyer's deal team negotiated that no judge has blessed. An unapproved service commitment is worth very little when the estate is being liquidated.
The second question is funding. Even an approved TSA depends on the estate having the cash and the staff to perform. Wind down budgets are tight and shrink fast. Press for the TSA charges to be structured so the buyer's payments fund the very people delivering the services, and confirm the estate has committed personnel through the planned exit date, not just an intention to try.
The third question is priority. Understand where TSA performance sits relative to other estate obligations. If the services depend on third-party licenses, hosting, or payroll providers that the estate also owes money, those vendors can cut off the service regardless of what the TSA says. Map every underlying dependency and confirm it is funded, because the estate's promise is only as good as the contracts beneath it.
Day One in a 363 context is less about a smooth handover and more about survival. The carved-out business has to keep invoicing, paying people, and serving customers while the entity it depended on is being dismantled. Build the Day One plan on the assumption that the estate gives you the legal minimum and nothing more, then work backward to what the business must run itself from the first morning.
Prioritize the services that, if they stop, stop revenue. Order to cash, payroll, and core IT access are the functions where a gap is fatal. For each one, the buyer needs either a firm funded estate commitment or a standalone fallback ready before close. A reverse TSA, where the buyer takes over a function and the estate leans on the buyer briefly, is sometimes cleaner than relying on a winding down provider.
Documentation matters more here than anywhere. Because the estate's people may leave with no notice, capture runbooks, access credentials, and process knowledge during the brief window when those people are still paid. Knowledge transfer that a healthy seller would deliver over months has to happen in weeks, and the buyer should fund and schedule it as a named workstream, not assume it will occur by goodwill.
In a normal carve-out the buyer negotiates extension fee curves and a comfortable exit ramp. In a 363 sale the relevant clock is the estate's cash runway, which is usually far shorter than the buyer would like. The exit ramp has to be planned around when the estate stops being able to perform, not when the buyer would prefer to leave. Often that means a compressed exit, measured in weeks rather than the typical 6 to 12 months.
Build the exit plan to assume the worst credible date the estate stops performing, then deliver standalone capability before it. Where the estate signals it can continue, treat that as upside, not the base case. The buyer who plans for a long runway and gets a short one is the buyer who ends up running critical functions with no provider and no plan.
Keep a hard rollback option only where it is genuinely cheaper than accelerating. In most 363 situations the duplicate cost of standing up early is worth it, because the alternative is an unplanned cutover forced by an estate that simply stops. Pre-signing review work, the kind covered in our TSA Pre-Signing Review, is where these timelines get pressure-tested against the estate's real financial position rather than the deal team's hopes.
Start with court authority and funding. Confirm the TSA is an approved estate obligation, confirm the estate has budgeted cash and named staff to perform, and confirm every underlying third-party dependency is funded through your exit date. If any of those three is missing, the TSA is a hope, not a contract, and the buyer should price and plan accordingly.
Next, compress the timeline. Identify the revenue critical services, build standalone fallbacks for each, and target an exit measured in weeks. Treat knowledge transfer as an urgent funded workstream while the estate's people are still on payroll, because that window closes without warning.
Finally, govern it tightly. A bankruptcy TSA needs more frequent status reporting than a healthy one, because the provider's ability to perform is deteriorating in real time. Watch the estate's cash position as closely as the service metrics, and keep the exit plan ready to pull forward on short notice. The buyer who treats the estate as a counterparty that may fail at any moment is the buyer who survives Day One intact.
Only if the bankruptcy court has approved it as an obligation of the estate, usually through the sale order or a separate motion. An unapproved service arrangement carries little weight in a liquidation. Confirm court approval and confirm the estate has budgeted cash and staff to perform, because enforceability means nothing if the provider has no money to deliver.
Plan it around the estate's cash runway, not your preferred timeline. Wind down budgets are short, so target an exit measured in weeks rather than the 6 to 12 months a healthy carve-out allows. Build standalone fallbacks for every revenue critical service before close and treat any longer runway the estate can offer as upside, not the base case.
Underlying third-party dependencies. The estate may commit to a service that actually runs on licenses, hosting, or payroll providers the estate also owes money. Those vendors can cut off the service regardless of the TSA. Map every dependency beneath each service and confirm it is funded through your exit date.
Often yes. When the seller is insolvent, having the buyer take over a function and provide it back to the estate briefly can be cleaner than relying on a winding down provider. It puts control of the critical service with the party that has a reason to keep it running. Scope it tightly and price the duplicate cost against the risk of an estate that simply stops.
Negotiating transition services when the seller is under financial stress.
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