TSA Management: Extracting Clean from Carve-Out Complexity

The Carve-Out Challenge

When a division is carved out from a parent company — whether through divestiture, spin-off, or private equity acquisition — the technology is rarely self-contained. Shared ERP systems, integrated networks, common authentication, shared data centers, and cross-divisional applications create dependencies that must be unwound.

Transition Service Agreements (TSAs) bridge this gap, with the parent company continuing to provide technology services to the carved-out entity for a defined period. Managing TSAs effectively is one of the most challenging aspects of carve-out transactions.

Anatomy of a Technology TSA

A well-structured technology TSA defines:

Services in scope: Exactly which technology services the parent will provide — infrastructure hosting, application support, network connectivity, security services, help desk, etc.

Service levels: Measurable performance standards for each service. These should match the service levels the business received before the transaction, not aspirational targets.

Duration and extensions: The TSA term for each service, with provisions for extensions if separation activities take longer than planned. Extensions typically increase in cost to incentivize timely separation.

Pricing: Monthly fees for each service. TSAs are not profit centers — pricing should reflect actual cost plus a reasonable margin, not market rates.

Exit provisions: How services will be transitioned off the TSA, including data migration, knowledge transfer, and runbook documentation.

Common TSA Pitfalls

Poorly Defined Scope

The most frequent TSA issue is ambiguous scope. When the TSA says "parent will provide email services," does that include email archiving? Mobile device management? Spam filtering? Distribution list management?

Fix: Define scope at the service component level, not the category level. List every sub-service explicitly. Anything not listed is not included.

Underestimated Complexity

Separating technology that has been integrated for years or decades is inherently complex. Dependencies surface that were not identified during due diligence.

Fix: Conduct a thorough dependency analysis before structuring the TSA. Map every system interaction, shared database, integrated workflow, and cross-divisional data flow.

Misaligned Incentives

The parent company has limited incentive to provide excellent TSA services. The carved-out business is a departing customer. Key parent IT staff may have been assigned to other priorities.

Fix: Structure TSA pricing to incentivize the parent to maintain service quality. Include service level credits for failures. Establish regular governance meetings with escalation paths.

Extended Timelines

TSA extensions are expensive and create ongoing dependency. Organizations frequently underestimate the time required to stand up replacement services.

Fix: Begin separation planning before close. Establish an aggressive but realistic separation timeline. Staff the separation program with dedicated resources, not people doing separation work on top of their day jobs.

Separation Planning

Effective TSA exit requires a structured separation program:

Assessment Phase

Service mapping: For each TSA service, document the current state — how it works, who operates it, what it depends on, and who uses it.

Target architecture: Define the end-state technology environment for the separated entity. This should be designed from scratch based on the business needs, not simply replicated from the parent.

Gap analysis: Identify the gaps between current TSA services and the target architecture. These gaps define the separation work.

Build Phase

Infrastructure standup: Provision the new technology infrastructure — cloud accounts, networks, security tools, and management platforms.

Application migration: Migrate applications from parent infrastructure to the new environment. This often requires application modifications, data migration, and integration reconfiguration.

Data separation: Extract the carved-out entity's data from shared databases and systems. This is often the most complex and time-consuming workstream.

Identity separation: Establish a new identity platform (Active Directory, SSO) and migrate user accounts. This is a prerequisite for most other separation activities.

Transition Phase

Parallel operations: Run the new environment alongside TSA services. Validate that everything works correctly before cutting over.

Cutover execution: Migrate users and traffic from TSA services to new services. Plan cutovers for low-impact windows. Have rollback procedures ready.

TSA exit: Formally terminate each TSA service as the replacement is proven. Ensure data is migrated and access to parent systems is properly decommissioned.

Building the New Technology Foundation

A carve-out is a rare opportunity to build a modern technology foundation without legacy constraints. The target architecture should:

• Leverage cloud-native services rather than replicating on-premises infrastructure
• Implement modern security practices (zero trust, identity-centric)
• Adopt infrastructure as code and DevOps practices from day one
• Right-size the technology organization for the separated business

The worst outcome is spending millions to replicate the parent's legacy architecture. Use the separation as an opportunity to modernize.