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Transition Services Agreements (TSAs) – Planning Now for Post-Close

Divestiture Survey Report 2013: Sharpening your strategy

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Transition service agreements (TSAs) are typically the default option when complex, hurried transactions require the parent company to provide transitional services to the divested unit after a deal closes1. Eighty-seven percent of executives surveyed indicated their companies provide TSAs, but the largest percentage (39 percent) indicated they like to avoid TSAs, but will provide if necessary. Twenty-six percent indicated their organizations like TSAs to facilitate divestiture and manage costs, while 22 percent indicated they are a common practice in order to sign-up buyer

Companies can benefit by using TSAs as a deal-making strategy. Based on Deloitte’s experience, transition services are a necessary, if undesired, part of many divestitures. Even in situations where the deal team does not want to use TSAs, planning for them avoids the possibility of unfavorable last-minute service negotiations. Companies can be better prepared for Day 1 and reduce risk if they plan for the contingency of using TSAs and then later, if feasible, remove or reduce the scope of services.

Don't lose money on TSAs 

When it came to costs, 69 percent of executives surveyed indicated that they had found that cost estimates for TSA services were fairly accurate compared to expectations. Among the remaining executives, 23 percent reported costs were under-estimated, and 8 percent indicated they were over-estimated.

Read more about strategies around TSAs in our  Transition Services Agreements (TSAs) – planning now for post-close chapter in our Divestiture Survey Report 2013

Dig deeper 

To continue learning about the key insights and findings from our Divestiture Survey Report 2013, access our results in the following ways: 

1 Source: “CFO insights: Divestitures and Carve-outs: Becoming a Prepared Seller,“ Deloitte, 2010

 

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. 

Deloitte Corporate Finance LLC ("DCF"), member FINRA, is a wholly owned subsidiary of Deloitte Financial Advisory Services LLP ("Deloitte FAS"). Deloitte FAS is a subsidiary of Deloitte LLP. Investment banking products and services within the United States are offered exclusively through DCF.

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