M&A, disposals and transition services agreements

Every carve-out ends with the same question: whose systems is the history living on?

When a business is bought, sold or divested, the operational separation happens quickly – people, contracts and customers move on the day the deal closes. The data does not. Decades of finance, tax, HR and product records stay behind on the seller’s systems, and the buyer needs them for compliance long after close. The usual bridge is a Transition Services Agreement (TSA), with the seller running its old systems on the buyer’s behalf, typically at a significant cost, particularly if extended.

This paper looks at the data side of M&A separation: why Transition Services Agreements can run longer and cost more than anyone plans, what carve-out data separation actually involves, and how decommissioning shortens the agreement – or in some cases, removes the need for it altogether.

A TSA keeps the seller providing services – most often IT – to the divested business after close. It is meant to be short. In practice, agreements commonly run twelve to twenty-four months, with service fees and markups on top, and both sides leak value for the duration: the seller carries stranded costs and obligations it does not want, and the buyer cannot fully run the business and build a strong data foundation until the systems are under its own control.

For data, the TSA is usually not a solution at all – it is deferral. The records the buyer is required to retain still live inside the seller’s ERP, sometimes entangled with the retained business. Nothing has been separated; the old answer has simply been rented for the TSA duration. If a data strategy plan is not executed, the TSA may be extended.

“A TSA does not solve the data question. It rents the old answer for the TSA duration.”

The data problem appears in every direction a deal can run – the scenarios behind M&A carve-outs as a use case:

• Acquisition. The buyer inherits responsibility for the acquired business’s history – financial, tax and product records – but not the systems it lives in, and often cannot receive it in a format it can readily use.
• Divestment or carve-out. The seller must hand over the divested unit’s data – and only that data – from shared systems where it is entangled with the retained business, then be able to dispose of its own copy compliantly.
• Post-merger rationalisation. After integration, the combined group runs duplicate ERPs. One survives; the others are kept switched on for years, purely because of the records inside them.

Decommissioning replaces the rented bridge with a clean handover. Exactly the in-scope data – selected by company code, entity or business line – is extracted from the source systems into an independent, governed store such as Cella, where it stays accessible, reportable and compliant for the party that needs it. The buyer gets its history without the seller’s systems; the seller gets its systems back without the buyer’s data.

• Extract in scope. All or selected data – structured and unstructured – filtered to the divested entity, reviewed and verified with both parties.
• Retain compliantly. Records held with retention rules, legal hold and audit trail, accessible to named users for reporting, audit and recall obligations. The data is held in full business context supporting tax authorities and auditors.
• Dispose cleanly. The seller’s estate is cleared of the divested data – and the duplicate systems can be retired instead of running to the end of the agreement.
• Exit the TSA. With the data separated, the IT strand of the agreement – often its longest tail – can close early, or never be needed.

The commercial prize is real: analyses of recent carve-outs find that exiting TSAs faster is one of the biggest levers of deal value, even worth several percentage points of uplift – and every month of TSA fees avoided lands straight in the deal model.

Both directions are already published Cella case studies. When Nouryon acquired CP Kelco’s CMC business, the historical financial, tax and product-batch data it needed could not be delivered in a usable format – so a read-only sleeper system in Cella captured 1.6 TB of in-scope data in a twelve-day extraction, with access limited to named users and full compliance retained.

OCI Global travelled the other road: after a series of divestments and successive moves across SAP ECC and S/4HANA editions, its historical data was retired into Cella Cloud with a five-year retention model – removing the cost and complexity of maintaining the legacy systems, with savings the client described as significant.

The best time to answer the data question is before close, when the TSA is being scoped: which records must move, which must stay, which must be disposed of, and what each side’s retention obligations actually are. Answered early, the data workstream shortens the agreement instead of extending it.

Answered late is still better than rented indefinitely – a separation can begin at any point in the TSA’s life. Talk to our team about separating, retaining and retiring deal data – and potentially reduce TSA costs and build a stronger data foundation.