The TSA glossary, in plain buyer-side language.

Transition Services Agreement (TSA)

The contract that defines the services the seller continues to provide to the carved-out business after close. Scope, pricing, term, exit terms, SLAs, governance.

Reverse TSA

The mirror image. The contract that defines services the buyer provides back to the seller after close. Usually for payroll, IT and benefits administration in a partial carve-out.

Stranded Costs

Costs that remain inside the operating model after exit from the TSA because services, contracts or assets did not migrate cleanly. The number that gets found in the next sponsor's diligence.

Day One Readiness

The operational state required for the carved-out business to function from the close date. Across IT, finance, HR, treasury, procurement, tax, legal, cybersecurity and Newco commercial operations.

TSA Extension Fee

The premium charged by the seller when the buyer needs to extend a service past the original TSA term. Usually steep and structured to disincentivize buyer slippage.

Service Catalog

The detailed schedule listing each service the seller provides under the TSA. Service description, scope, exclusions, deliverables, pricing methodology, SLAs.

Cost-Plus Pricing

The pricing model where the seller charges the buyer the seller's allocated cost of providing the service plus a mark-up. The most common TSA pricing model. Often the most contested.

Pass-Through

Third party costs that the seller passes through to the buyer at the seller's actual incurred cost, without mark-up. The buyer should validate every pass-through line.

Mark-Up

The percentage the seller adds on top of allocated cost when pricing TSA services. Often expressed as cost-plus a number. Industry benchmarks vary by service type.

Exit Ramp

The contractual mechanism by which the buyer ends each service line ahead of the TSA term end. Notice periods, knock down obligations, transition support, data handover.

SLA (Service Level Agreement)

The performance standard the seller is contractually required to meet for each service. Uptime, response time, completion time, accuracy. Breach triggers credits or remedies.

Service Credit

The remedy paid by the seller to the buyer when the SLA is breached. Often a percentage of the monthly service charge. Usually capped per month and per term.

Governance Committee

The joint committee with named seller and buyer members that meets on a defined cadence to manage the TSA. Reviews service levels, scope changes, exit progress, dispute escalation.

Workstream

A defined service area inside the TSA. Typical workstreams include IT, finance, HR, treasury, procurement, tax, legal and cybersecurity. Each has its own lead and exit plan.

Carve-Out

The transaction where a parent company sells a business unit, division or subsidiary. The TSA bridges the operational dependency that remains between parent and Newco after close.

Divestiture

The seller side label for the same transaction. The seller's divestiture office manages the program of separating the unit from the parent and writing the TSA.

Operating Partner

The senior person inside a private equity firm who owns the value creation plan for one or more portfolio companies. The owner of the TSA exit timeline.

Value Creation Plan

The PE firm's plan to grow EBITDA and exit value between close and sale. TSA cost reduction, exit acceleration and Day One readiness all sit inside the plan.

Newco

The legal entity that becomes the carved-out business after close. The TSA is the temporary scaffolding that keeps Newco operational until it stands alone.