---
title: "What Is Carve-Out TSA?"
term: "Carve-Out TSA"
description: "A carve-out TSA (transitional services agreement) is a contract where the parent company continues providing shared services — IT, finance, HR, logistics — to a newly separated business for a limited period after a carve-out closes."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/carve-out-tsa
---

# What Is Carve-Out TSA?

> A carve-out TSA (transitional services agreement) is a contract where the parent company continues providing shared services — IT, finance, HR, logistics — to a newly separated business for a limited period after a carve-out closes.

**A carve-out TSA** is a transitional services agreement under which the selling parent continues operating shared functions for a carved-out business while it builds standalone infrastructure.

### How it works

Day one after a [carve-out](/glossary/carve-out), the new entity may lack ERP systems, benefits administration, or data centers. The TSA lists services, service levels, pricing (often cost-plus), term length (commonly 12–24 months with extensions), and exit milestones.

Typical TSA scopes: IT helpdesk, SAP hosting, treasury, legal, real estate, manufacturing support. Each service has a **migration plan** with owners on both sides. Delays inflate costs and can breach covenants if stand-alone EBITDA was modeled without TSA drag.

Founders competing with carved businesses should watch TSA end dates — operational agility often improves after separation completes.

TSAs are negotiated line-by-line: an IT TSA without defined exit criteria can trap the carved business on legacy ERP systems long after the deal closes, inflating stand-alone costs beyond the investment model.

Legal teams should map each TSA service to a standalone owner and migration milestone before signing — not after close when leverage shifts to the parent.

### Why it matters

- **Investors:** Underwrite TSA expenses explicitly; parent pricing may rise at renewal. Short TSAs reduce dependency risk but require faster capex on systems.
- **Founders (as operators in carve-outs):** Job one is exiting the TSA on schedule — slippage erodes the investment thesis.

### Common mistake

Assuming the parent will flexibly extend free support after TSA expiry. Renewals renegotiate at market rates or stop abruptly — plan migrations early with named owners on both sides.

### Related ideas

See also [carve-out](/glossary/carve-out), separation planning, stand-alone EBITDA, and [buyout](/glossary/buyout).

## FAQ

### What is a carve-out TSA in simple terms?

After a company spins off a unit, the parent often keeps running payroll, email, or accounting for months under a paid services contract until the new company builds its own systems.

### Why does carve-out TSA matter?

For PE buyers, TSA fees and exit deadlines drive integration budgets. For operators, dependency on the parent can block product or sales changes until services migrate.


---
Source: https://venturecapitaltracker.com/glossary/carve-out-tsa