Carve-outs and TSAs: the IT and vendor costs that surprise new owners
The TSA covers the first months. The bill arrives when you exit it: standalone licensing, lost volume discounts and contracts that never transferred.
A carve-out deal model always has a line for standalone costs. It is almost always too small. Not because anyone hid anything, but because the costs that matter most only show up when the business tries to stand on its own, after the transition services agreement ends.
We have seen both sides: inside the parent providing services, and alongside the new owner trying to get off them. The surprises are predictable. That makes them avoidable.
How the TSA hides the problem
During the TSA, the parent keeps running IT, payroll, finance systems and often purchasing, for a fee that is usually built on cost plus a margin. It feels cheap. That's because the carved-out business is still riding on the parent's scale: its enterprise software agreements, its cloud commitments, its carrier contracts, its security stack.
Extensions are where it starts to hurt. FTI Consulting, advising sellers on TSA design, recommends 30 to 60 days' notice for exits, changes and extensions, and premium pricing on extensions. Sellers are being told to make overruns expensive. Plan as though yours will be.
The costs that surprise
| Cost | Why it surprises | What to do before signing |
|---|---|---|
| Software at standalone scale | Group pricing does not transfer. Microsoft removed programmatic volume discounts on Online Services under Enterprise Agreements from November 1, 2025, so a smaller standalone buyer starts closer to list. | Get standalone quotes from the top ten software vendors during diligence |
| License assignment and consent | Many enterprise agreements cannot be split or assigned without vendor consent, and the vendor knows you need it | Map consent requirements and open vendor conversations before signing |
| Infrastructure minimums | Broadcom raised the VMware minimum purchase from 16 to 72 cores in April 2025, per The Register, alongside a 20% penalty on late renewals | Decide early whether to replicate the parent's virtualization stack or replace it |
| Cloud and data separation | Data extraction, duplicate environments during cutover, and transfer charges | Budget for running two environments in parallel for months |
| Telecom and network | Circuits and carrier contracts sit in the parent's name, with long lead times for new orders | Inventory sites and order new services in the first weeks |
| Security and compliance | The parent's security operations, identity and audit tooling do not come with the deal | Price a standalone security stack inside the deal model |
| Shared vendor contracts | Agencies, consultants and outsourced services contracted at group level | List every shared contract and decide: transfer, re-paper or rebid |
Where the money comes back
Standing up from scratch is the one moment a company can buy exactly what it needs. The parent's stack was built for a much larger enterprise. A carve-out of a few hundred people does not need all of it. In carve-outs we have supported, the standalone build is a chance to buy a simpler stack, not a smaller copy of the parent's.
Three rules we work by:
- Price standalone during diligence. Real quotes from the largest vendors, not a percentage uplift on allocated cost.
- Set TSA exit dates by service, not one date for everything. Telecom and email can leave early. ERP will be last.
- Run vendor negotiations in parallel with the TSA. The worst time to negotiate a standalone software agreement is the month the TSA expires.
The question to ask before signing
For each service on the TSA schedule, ask: who provides this the day after the TSA ends, on what contract, at what price? If the answer for any material service is "we will figure it out," there is a number missing from the model.
Sources: FTI Consulting, Essential strategies for sellers developing a TSA, The Register, Microsoft kills volume rebates, The Register, VMware minimum subscriptions jump from 16 to 72 cores.
What is a TSA in a carve-out?
A transition services agreement, under which the seller keeps providing services such as IT, payroll and finance systems to the divested business for a fee after close, until the buyer can operate on its own.
Why do standalone IT costs often exceed the deal model?
The business loses the parent's scale. Group software discounts, license transfer consents, infrastructure minimums, parallel running during migration and new security tooling all land around the TSA exit.
When should a buyer price standalone vendor costs?
During diligence, using real quotes from the largest vendors, with TSA exit dates set service by service and vendor negotiations running in parallel with the TSA.
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