Transitional Services Agreements in Dutch Carve-Outs

Services, costs, liability and separation planning after completion

In a Dutch carve-out, completion rarely means full operational separation. The carved-out business may still depend on the seller for IT, finance, HR, payroll, premises, procurement, data, software licenses, compliance or management support.

A Transitional Services Agreement, or TSA, documents which services the seller will continue to provide after completion, for how long, at what cost and under what service levels. Without a properly scoped TSA, the buyer may acquire the business but lack the operational infrastructure needed to run it.

This article is part of ViottaLaw’s Dutch M&A Insights and connects to Dutch carve-out mechanics in cross-border PE transactions, signing and closing in Dutch M&A, legal due diligence in Dutch M&A and post-closing disputes after Dutch acquisitions.

Why a TSA can be closing-critical

A carve-out is not only a transfer of shares or assets. It is also a separation exercise. The buyer needs to know whether the carved-out business can operate on day one after completion.

If core services remain embedded in the seller’s group, the TSA may become a closing-critical document. The buyer will not want to complete without continuity of essential services. The seller will not want to provide open-ended support after closing.

For foreign buyers and international counsel, the practical point is that the TSA should be scoped alongside the SPA or asset purchase agreement, not after completion.

The service schedule is the core document

The most important part of a TSA is the service schedule. It should identify each service with enough detail to be operationally useful.

Generic wording such as “IT support” is not enough. The schedule should specify systems, applications, user access, helpdesk support, hosting, data migration, cybersecurity monitoring, reporting and response times.

The same applies to finance, HR, payroll, procurement, premises, compliance, licenses and management support. For each service, the schedule should identify scope, baseline volume, service owner, dependencies, duration and exit milestone.

Pricing, volume and change requests

The TSA should state how services are priced. Pricing may be cost-based, cost-plus, fixed fee or time-based.

For sellers, the key concern is avoiding open-ended obligations. For buyers, the key concern is cost predictability and business continuity.

Change requests should be regulated. What happens if the buyer needs more users, additional reports, extended access, different systems or a longer service period? Can the seller refuse? What pricing applies? Who approves the change?

A TSA without change-control mechanics can quickly become a post-closing dispute.

Service levels, dependencies and liability

Service levels should define the expected quality and availability of services. This may include response times, uptime, escalation contacts, reporting obligations, data backup and issue resolution.

At the same time, the TSA must be realistic. The seller is providing transitional support to a business that is being separated from its group. It may rely on third-party systems, legacy processes or retained employees.

Liability should therefore be carefully calibrated. Too much liability may be unacceptable for the seller. Too little liability may leave the buyer exposed if essential services fail.

Data, cybersecurity, IP and third-party contracts

Data and IT are often the most sensitive part of a carve-out TSA. The agreement should regulate access, data protection, cybersecurity, user management, confidentiality, data migration and incident reporting.

IP and software licenses should also be reviewed. Some group licenses may not permit use by a separated business. Some third-party contracts may require consent. Some systems may contain data from both the sold business and the seller’s retained business.

These issues should be identified before signing, because they may affect transaction structure, closing deliverables and integration planning.

Term, extension and exit plan

A TSA should be temporary. The documents should therefore include an exit plan.

For each service, the parties should agree on an end date, migration steps, responsible party and dependencies. If extension is possible, the agreement should specify process, pricing and maximum duration.

A longer TSA is not necessarily better. It may preserve continuity, but it can also delay real separation and keep the buyer dependent on the seller.

Practical conclusion

A TSA is not an administrative appendix. In a carve-out, it can determine whether the buyer can operate the acquired business after completion.

Professional deal teams should identify shared services early, scope the service schedule before signing and connect the TSA to closing deliverables, integration planning and the SPA risk allocation.

FAQ

Is a TSA part of the SPA?

It is usually a separate agreement, but it is often attached to the SPA or required as a closing deliverable.

Which services are commonly covered?

IT, finance, HR, payroll, premises, procurement, compliance, data, licenses and management support.

How should TSA pricing be set?

Pricing may be cost-based, cost-plus, fixed fee or time-based, depending on the nature of the service and the deal.

Who bears third-party consent risk?

The SPA or TSA should allocate responsibility for obtaining consents and define the consequences if a supplier does not cooperate.

How does a TSA end?

It should end through defined service-specific exit milestones, migration steps and termination dates.

About Dirk de Waard

Dirk de Waard is a Dutch corporate, M&A and venture capital lawyer and partner at Venture Lawyers in Amsterdam. He advises foreign buyers, sellers, PE funds, management teams and international counsel on Dutch M&A implementation, carve-outs, TSAs, SPA drafting and post-closing governance.

ViottaLaw is Dirk’s personal insights platform. Legal services are provided through Venture Lawyers.

Preparing a Dutch carve-out TSA?

A Dutch carve-out requires clear documentation on transitional services, service levels, costs, data, IP, liability and separation planning.

Dirk de Waard advises buyers, sellers and international deal teams on Transitional Services Agreements in Dutch carve-outs. Contact Dirk at dirk.dewaard@viottalaw.com to scope the TSA or service schedule before signing.