Negotiating a Transition Services Agreement is a balancing act: the carve-out needs uninterrupted service, while the parent must recover costs without becoming a perpetual service provider. Use the checklist below to structure negotiations, set clear expectations, and avoid last-minute disputes. Confirm each item during term-sheet drafting, and re-validate before signing the master TSA.
- Precise service scope and deliverables
- Sunset date for every service plus fee-escalation rules after that date
- Pricing model (cost-plus %, unit rate, or fixed fee) and auditable cost drivers
- True-up cadence and methodology for volume variances
- Mark-up or overhead allocation percentage explicitly stated
- Detailed SLAs with credits/penalties and monthly cap
- Exit-readiness checklist embedded in each schedule
- Data-security and privacy obligations (encryption, breach notification, data return/destruction)
- Change-control process with impact assessment and approval thresholds
- Governance structure—meeting cadence, dashboard format, escalation ladder
- Knowledge-transfer requirements and dual-run period length
- Audit rights for cost verification and security-control inspection
- Liability caps and indemnity clauses, including exclusions for data breaches
- Tax treatment—responsibility for VAT/GST or withholding taxes
- Dispute-resolution sequence and governing law
