Reverse TSA Advisory
When the buyer is the provider. Pricing, scope, and exit need a specialist.
Fixed-fee proposal in 48 hours. Senior team on day one. The first conversation is always free.
A reverse TSA is the contractual mirror of a standard Transition Services Agreement. In a reverse TSA, the buyer provides services to the seller for a defined period after closing. Every assumption baked into a standard TSA inverts. The buyer is now the provider, the seller is now the recipient, and the operational, financial, and legal exposures all move with the role change. The work sits inside the broader reverse TSA advisory practice and demands the same buyer side discipline that a standard TSA requires, with the directional polarity reversed.
A reverse TSA arises when the acquired business holds an asset, capability, or service that the seller still needs after closing. The most common cases involve shared services where the carved out unit historically delivered a function to the parent. Examples include an acquired manufacturing unit that produced a component used by the seller's retained product lines, an acquired technology platform that the seller continues to use for retained operations, an acquired commercial team that managed a relationship the seller wants to preserve, or an acquired data center that hosts seller systems pending the seller's own migration.
A second common case involves contractual or regulatory continuity. The acquired business may hold licenses, customer contracts, or regulatory authorizations that the seller needs to access until the seller's own arrangements are in place. The buyer continues to operate under those authorizations and provides the resulting service back to the seller for a defined period.
A third case is operational practicality. The seller may need access to records, systems, or personnel that have moved to the buyer for a transitional period. The reverse TSA documents that access and the associated obligations. Where the access is brief and routine, the reverse TSA may be a few pages. Where the access involves substantive ongoing service delivery, the reverse TSA is a full contract with the same complexity as a standard TSA.
The PE buyer of a corporate carve out faces reverse TSAs frequently. Multi line corporate sellers spinning off a single business unit routinely want the buyer to continue providing services back to the retained organization for some period. The buyer side review must address both the forward TSA (seller to buyer) and the reverse TSA (buyer to seller) as paired instruments. The work pairs with the reverse TSA explained primer.
First, the cost direction inverts. In a standard TSA, the buyer pays the seller for services. In a reverse TSA, the seller pays the buyer. The pricing model needs to be evaluated from the buyer's perspective as the provider. Cost plus pricing now produces revenue. Fixed fee pricing now produces fixed margin. The buyer needs to ensure the pricing recovers cost and produces a reasonable margin for the operational burden.
Second, the operational burden inverts. The buyer now has to deliver a service to the seller on the seller's timeline and within the seller's tolerance. The buyer's operations team has to allocate capacity to seller demand. The capacity allocation can become a constraint on Newco's own operations if the reverse TSA scope is large relative to the buyer's resource base.
Third, the SLA exposure inverts. In a standard TSA, the buyer is the beneficiary of SLAs and the recipient of service credits when SLAs miss. In a reverse TSA, the buyer is the provider of SLAs and the obligor of service credits. The buyer needs SLA definitions that are realistic given the operational constraints of running services for a third party with whom the buyer has no long term relationship.
Fourth, the exit risk inverts. In a standard TSA, the buyer wants to exit as fast as possible. In a reverse TSA, the seller wants the buyer to exit as fast as possible. The buyer needs an exit timeline that supports the seller's transition without absorbing endless capacity drain. Fifth, the data and IP exposure inverts: the buyer now provides data and access to the seller. Sixth, the dispute exposure inverts: the buyer can now be sued for service failure by the seller.
The dominant pricing model for reverse TSAs is cost plus. The buyer recovers documented direct cost plus an agreed mark up to cover overhead and operational margin. Mark up levels typically run 5 to 15 percent for routine services and 15 to 25 percent for services that require dedicated resource allocation or specialist capability. The buyer side review benchmarks the mark up against industry typical levels and adjusts for the operational complexity of the specific service.
Fixed fee pricing is sometimes used for routine services with predictable demand. The fixed fee gives the buyer cost certainty and removes the monthly cost calculation burden. The risk is that demand patterns change and the fixed fee no longer covers actual cost. Where fixed fee is used, the buyer side advisor builds in a recalibration mechanism (typically quarterly or at agreed demand thresholds) that allows adjustment if actual cost varies materially from the original estimate.
Pass through pricing applies to third party costs the buyer incurs on the seller's behalf. The buyer should never absorb third party costs without recovery. Vendor fees, license costs, infrastructure costs, and any other costs the buyer pays a third party to deliver the service to the seller should pass through at cost with appropriate documentation. The buyer side advisor structures pass through to be transparent and auditable.
The pricing model interacts with the duration. Short reverse TSAs (under three months) often use fixed fee for simplicity. Medium duration (three to twelve months) typically use cost plus with monthly billing. Longer reverse TSAs (over twelve months) often combine cost plus pricing with periodic recalibration and an extension fee structure that escalates the longer the seller delays exit. The work pairs with the reverse TSA pricing models framework.
The reverse TSA service catalog defines exactly what the buyer will provide and exactly what the seller can request. Tight definitions protect the buyer. Loose definitions let the seller expand scope through routine requests and consume buyer capacity without compensation. The buyer side advisor builds the service catalog with the same discipline used for a standard TSA, just with reversed beneficiary.
Each service definition should include a clear description of what the buyer provides, what volume or capacity is included, what is excluded, what change requests are permitted, and what the seller must do to receive the service. The exclusions are particularly important. A service definition that excludes activities the seller might want will produce friction during the operating period, but it will also prevent the seller from claiming the activity was always included.
Volume and capacity limits matter. Where the buyer has finite operational resources, the reverse TSA needs caps. The buyer should not commit to unlimited demand. Common caps include user counts, transaction volumes, ticket volumes, processing capacity, or storage allocations. Above the cap, the buyer either declines further demand or charges incremental fees on a tiered basis. The buyer side advisor builds the cap structure based on actual operational capacity, not the seller's estimated demand.
Change request mechanics for reverse TSAs need particular care. In a standard TSA, change requests work in the buyer's favor because the buyer is the recipient. In a reverse TSA, change requests can work against the buyer. The buyer side advisor builds change request mechanics that require buyer approval for scope additions, compensation adjustments for changes that materially increase buyer cost, and rejection rights for changes that would impair the buyer's own operations. The work pairs with the reverse TSA service catalog design framework.
SLA design for a reverse TSA needs to reflect operational reality. The buyer's operations team is now committing to performance standards for services being delivered to a third party. The SLAs should reflect the buyer's actual operational capability, with appropriate margin for variability. Sellers sometimes push for SLAs that match historical internal performance levels. Those levels were achieved when the service was delivered inside the same organization with full executive support. They may not be achievable when the service is delivered to a separated counterparty.
Service credit exposure should be capped. Most reverse TSAs cap monthly service credits at 25 to 50 percent of the monthly service fee, similar to standard TSA structures but with the buyer now bearing the exposure. The buyer side advisor reviews the cap level against the operational risk profile and adjusts. Where the seller demands higher credits for specific services (such as services that the seller's own operations depend on), the buyer requires higher pricing in compensation.
Force majeure and excusable delay provisions need careful drafting. The buyer should retain protection against performance failures driven by events outside the buyer's reasonable control. The seller may push for tight force majeure language. The buyer side advisor calibrates the force majeure scope to reflect the operational risks the buyer cannot easily mitigate, particularly where the services depend on third party infrastructure or vendor performance.
Liability caps are essential. The reverse TSA should cap the buyer's total liability at an agreed amount, typically a multiple of the annual service fee. Without a cap, the buyer could face damages claims that exceed the entire commercial value of the reverse TSA. Sellers sometimes propose uncapped liability for specific categories (data breach, IP infringement, willful misconduct). The buyer side advisor evaluates each carve out and accepts only those that are operationally manageable.
The reverse TSA exit timeline is the central operational variable. The buyer wants the seller off the buyer's resources. The seller wants ample time to transition. The contractual exit date defines the baseline. Most reverse TSAs run 3 to 12 months, with some extending to 24 months for complex separations. The duration is set in the reverse TSA at signing and rarely shortens without seller agreement.
Extension fees discourage seller delay. A well drafted reverse TSA escalates the price after the original exit date. Common structures include a 25 percent mark up on the original fee for extensions of 1 to 3 months, a 50 percent mark up for extensions of 3 to 6 months, and a 100 percent or higher mark up for extensions beyond 6 months. The escalation gives the seller a real economic incentive to complete its own transition on schedule.
Hard exit provisions matter. The reverse TSA should specify a final hard exit date beyond which the buyer is no longer obligated to provide services regardless of seller readiness. The hard exit protects the buyer from open ended capacity commitments. The seller may push back on hard exit dates. The buyer side advisor holds firm. Without a hard exit, the buyer's operational planning becomes hostage to the seller's transition timeline.
Reverse TSA work is delivered under a Fixed Fee or Portfolio Retainer engagement model through Reverse TSA Advisory. The buyer side advisor builds the pricing, scopes the catalog, calibrates the SLAs, sizes the liability caps, drafts the extension mechanism, and structures the hard exit. The work happens during pre signing review alongside the standard TSA review and produces a paired contractual structure that protects the buyer on both sides of the deal. The work pairs with the reverse TSA exit strategy framework.
The TSA negotiation pillar covers the clause and pricing mechanics behind every reverse TSA. Corporate buyers face the same dynamics from the provider side.
The operational role change. How buyer side teams stand up service delivery to the seller.
Read the article →Cost plus, fixed fee, pass through, and how buyers structure pricing to recover full cost.
Read the article →How buyers structure exit, manage extensions, and enforce the hard exit date.
Read the article →The 90-day governance, IT, finance, HR and procurement separation plan we run on live carve-outs. Get the playbook plus the bi-weekly Day One Letter — short, signal-heavy, buyer-side.
No spam. Unsubscribe in one click. · Read the overview first →
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.
In a reverse TSA the buyer provides services back to the seller — the unusual seat where you are now the provider, with your own pricing, scope, exit and liability traps. On a representative four-service reverse arrangement, pricing at cost rather than cost-plus-risk leaves roughly $0.6M of real burden unrecovered over a nine-month term.
One tactic, one benchmark, or one pattern from a recent buyer-side engagement. Short. Signal heavy. Free.
Subscribe to The Day One Letter →