A TSA agreement, or transition services agreement, is what keeps a sold business running after close while the buyer stands up its own payroll, IT, accounting and benefits. It is usually negotiated late, priced roughly, and then runs for a year at a number nobody modelled properly, which is why it produces more post-close friction than almost any other document in the deal. This page sets out what it actually covers, how the pricing arguments go, and how a TSA is supposed to end, which is service by service rather than all at once.
It is a schedule per service, not one agreement
The body of a TSA is short and the schedules are the document. Payroll is one schedule, IT is another, accounting is another, and each has its own scope, its own price and its own end date. That structure is not bureaucracy: it is what makes an early exit possible on one service without renegotiating the whole thing, and a TSA drafted as a single undifferentiated service is a TSA that runs to its full term whether or not the buyer needs it to.
The markup is the argument, and it is small in percentage terms
Sellers charge cost plus a modest markup on the argument that they are carrying work they no longer benefit from. Buyers point out that the cost is already sunk. Both are right, and the argument is usually settled faster when the markup is expressed in dollars rather than percent: on this site's TSA arithmetic, seven services at $4,200 a month with an 8% markup return $28,224 over a twelve-month term, on $352,800 of underlying cost.
Exit dates should be earlier than anybody expects
The default drafting instinct is twelve months on everything, because nobody wants to be the person who set a date the buyer misses. The effect is that services which could have been migrated in ten weeks run for a year, at cost plus markup, while the seller's staff stay on a system they were meant to have left. Shorter dates with an option to extend cost less and concentrate minds better than long dates with an option to exit.
Who runs it after close is a real question
A TSA needs an owner on both sides who is measured on ending it. Left to itself it becomes somebody's part-time administrative burden and nobody's priority, and the services quietly renew. This is the piece the deal team hands over, and handing it over without a named owner is how a twelve-month TSA becomes an eighteen-month one.
Questions people ask about tsa agreement
Is a markup on a TSA normal?
A modest one is common. Whether it is reasonable is easier to judge in dollars: 8% on seven services at $4,200 a month is $28,224 across a year.
Who drafts the TSA?
Usually the buyer's counsel, working from a services list the seller's operations people build. The adviser's job is making sure the list is complete before close, not after.
Can a service end early?
If it has its own schedule, yes, and that is the main argument for structuring it that way. A single undifferentiated service runs to its stated end date.