What a fair TSA actually costs, from the buyer's seat. The figures below synthesize published industry sources with TSA Advisory engagement experience. They are directional benchmarks for negotiation — not a substitute for a costed, line-by-line review of your own agreement.
Most TSAs are priced at cost or cost-plus. The markup is where buyer value is won or lost. Routine, high-volume shared services should carry a modest markup; scarce or specialized services command more, but the level must be justified and negotiated — ideally before signing.
| Service character | Typical markup band | Buyer note |
|---|---|---|
| Routine shared services (payroll run, hosting, helpdesk) | 0–single digit % | Push for cost or low single-digit; demand cost transparency |
| Standard back-office (finance ops, HR admin) | ~5–10% | Benchmark against internal stand-up cost |
| Specialized / scarce (bespoke ERP, niche engineering) | 10%+ | Justify the premium; tie to a hard exit date |
| Pass-through (third-party licenses, cloud) | 0% (at cost) | No markup on pass-throughs; verify against invoices |
Markup conventions per Deloitte and Stradley (see sources). Bands reflect common negotiated outcomes, not a rule.
Benchmark 2There is no reliable "TSA as a percent of revenue" rule — anyone quoting one is guessing. The honest benchmark is the fully-loaded cost to operate each function independently. In complex carve-outs with extensive shared services, total TSA fees commonly run several million dollars per year, which is why the cost methodology (not just the headline rate) is the commercially significant negotiating point.
Benchmark 3Extensions are where TSA economics turn against the buyer. The standard mechanism is a step-up of roughly 15–30% per extension period, escalating with each renewal. The step-up exists to push the buyer to finish standalone readiness on time. The buyer-side move is to model extension exposure weekly and to negotiate the step-up schedule and notice windows before signing — not when the milestone is already slipping.
| Extension period | Typical step-up vs base rate |
|---|---|
| First extension | +15–20% |
| Second extension | +25–30% |
| Beyond | Often punitive / uncapped |
Step-up convention per Acquisition Stars and Stradley (see sources).
These benchmarks synthesize publicly available guidance from Deloitte, PwC, Stradley Ronon, and practitioner sources, combined with TSA Advisory's buyer-side engagement experience. They are directional. We do not publish a proprietary survey dataset; where we cite a range, it reflects commonly negotiated outcomes, not a statistical sample. For a costed read on your own TSA, the only reliable benchmark is a line-by-line review.
Sources: Deloitte, The Art of TSA Negotiations; PwC, Expediting TSA exits; Stradley Ronon, TSAs: What to Consider for Carve-Out Transactions; Acquisition Stars, TSAs in Carve-Out Transactions: Scope, Duration, Economics.
Sellers commonly apply a markup on top of actual cost. Modest single-digit markups are typical for routine shared services; specialized or scarce services can carry more. Both the existence and the level of any markup are key economic points to negotiate, ideally pre-signing.
There is no single ratio. In complex carve-outs a divested unit can pay several million dollars per year in TSA fees. The right benchmark is the cost to stand the function up independently — not a fixed percentage of revenue.
Extensions typically carry a step-up of roughly 15 to 30 percent per period, designed to push the buyer to finish standalone readiness on schedule. Model the exposure weekly and negotiate the step-up schedule before signing.
See also: TSA duration by function → · TSA Cost Reduction guide →
We cost your agreement line by line against market and tell you exactly where the markup, pass-throughs, and extension terms are out of line — before you sign or before you renew.
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