Why TSA agreements are central after an acquisition
In a business sale transaction between SMEs in Switzerland, closing almost never coincides with the buyer's immediate operational independence. IT, accounting, human resources, logistics, and administration often continue to depend on the seller's infrastructure for weeks or months. To govern this transition period, parties use a Transition Services Agreement (TSA): a transitional services contract that defines what the seller continues to provide, at what price, for how long, and with what responsibilities.
In recent deals involving Sagls, SAs, or business units, TSAs have become a standard tool even outside large listed groups. The buyer avoids operational disruption; the seller monetizes marginal costs and retains control over critical transitions. For the CFO, however, a TSA is not a simple "support contract": it affects liquidity, post-deal margins, accounting separation, and reporting in the first financial year after the acquisition.
This guide explains how to structure, account for, and monitor a TSA in the context of Swiss SMEs, with reference to accounting standards (Swiss Code of Obligations, Swiss GAAP FER) and the most common tax implications.
What is a Transition Services Agreement
A TSA is an ancillary agreement to the divestiture transaction (SPA or share/asset purchase agreement or business unit sale). It does not transfer the business: it governs operational continuity until the buyer replicates the necessary functions.
Role of the seller
Continues to provide defined services — for example payroll processing, ERP hosting, shared warehouse management, or centralized accounting — using existing staff and systems.
The seller invoices costs (or an agreed price) and maintains obligations regarding quality, availability, and confidentiality until the TSA ends.
Role of the buyer
Receives transitional services for the acquired unit, coordinates the migration plan (IT cutover, HR onboarding, banking separation), and pays according to contractual terms.
The buyer must map each TSA line item in its integration plan and post-closing budget, avoiding underestimating the actual duration of dependence on the seller.
Services typically covered by a TSA in SMEs
The scope of a TSA varies depending on the degree of pre-deal integration. In Swiss SMEs, these areas are most common:
| Area | Concrete examples | Typical duration |
|---|---|---|
| IT and infrastructure | ERP access, email, VPN, backups, shared software licences | 3–12 months |
| Finance & accounting | Accounting, monthly closings, VAT, centralized treasury, group reporting | 6–18 months |
| Human resources | Payroll processing, OASI/occupational pension (AVS/LPP) administration, onboarding, personnel administration | 3–9 months |
| Operations | Shared warehouse, logistics, production at a common site, customer support | 6–24 months |
| Legal and compliance | Legacy contract management, dealings with authorities, document archive | 3–6 months |
A common mistake is to include in the TSA services that should have been transferred at closing (for example, key customer contracts or named-user licences). Each line item should be checked against the transaction perimeter and the asset separation plan.
Pricing models and transition costs
TSA pricing determines post-deal cash flow and the comparability of operating costs in the buyer's first set of accounts. The models most commonly used in Switzerland are:
Cost-plus
The seller invoices allocated direct and indirect costs plus a margin (often 5–15%). Transparent, but requires detailed reporting and agreement on allocation keys (FTEs, volumes, space occupied).
Fixed monthly fee
A fixed amount per service or package. Simplifies the buyer's financial planning, but may be too high or too low if volumes diverge from expectations.
Per-unit / per-transaction fee
For example, CHF per payslip, per order fulfilled, or per ERP user. Suitable for standardized services with measurable volumes.
One-time setup fee
Compensates the seller for initial activities (access configuration, training, data separation). Should be distinguished from recurring fees and recognized in the relevant period.
Transition costs also include one-time expenses not recurring under the TSA: IT migration consulting, licence duplication, staff training, double rent for premises, or temporary staff dedicated to cutover. These costs should be budgeted separately from the recurring TSA fee and monitored in the integration plan.
Accounting treatment of a TSA under Swiss standards
For the buyer, TSA invoices from the seller are generally operating expenses in the period in which the service is consumed. They are not part of the purchase price of the business or goodwill, except in exceptional cases where the TSA includes distinct asset elements (e.g. transfer of software licences with a multi-year term).
Buyer side
- Current operating costs → expense account by function (IT, administration, logistics)
- One-time setup → capitalize if it generates an identifiable future benefit, otherwise expense
- Accruals and matching → monthly recognition even with quarterly invoicing
- VAT → verify whether the seller invoices Swiss VAT and whether the buyer can recover input tax
- Consolidation → if both entities remain within the group perimeter, eliminate intra-group revenue/costs
Seller side
- Service revenue → operating revenue account
- Allocated costs → documented allocation on a causal basis (not arbitrary)
- TSA margin → monitor to ensure it covers at least incremental costs and administrative burden
- Dedicated staff → distinction between internal costs and any subcontracting
- TSA closure → cessation of revenue and reallocation of remaining resources
In acquisitions with a mid-year closing date, the buyer's first set of accounts often shows a mix of "pre-integration" costs (TSA) and "post-integration" costs (autonomous structure). For meaningful reporting, it is advisable to disclose in the notes the impact of TSA costs on results and indicate when normalized costs are expected to be reached.
Support duration and exit plan
TSA duration is a critical negotiating lever. Too short → operational risk and penalties; too long → structural dependence and hidden costs that erode the synergies expected from the transaction.
| Contractual element | Best practice |
|---|---|
| Initial term | Define for each service (not a single global expiry); e.g. IT 6 months, HR 3 months, finance 12 months |
| Extensions | Maximum 1–2 renewals with notice (30–90 days) and possible tariff adjustment |
| Exit milestones | IT cutover, final payroll run, closure of shared bank account, transfer of supplier contracts |
| Penalties and SLAs | Service levels, response times, penalties for migration delays (on both sides) |
| Exit assistance | Seller obligation to cooperate on data separation, return of archives, and revocation of access |
A detailed run-off plan — with owner, dates, and acceptance criteria for each service — reduces disputes at TSA end and facilitates handover to the auditor or board of directors in the first post-acquisition set of accounts.
Tax implications in Switzerland
Corporate income tax: for the buyer, deductible TSA costs reduce taxable profit in the relevant period. For the seller, TSA revenue contributes to operating income. In cross-border transactions, verify transfer prices and documentation compliant with OECD guidelines.
VAT: service supplies between two Swiss companies are generally taxable at the standard rate (8.1%), subject to specific exceptions. If seller and buyer belong to the same VAT group, consider group registration. Services provided by a foreign company not registered for Swiss VAT may trigger reverse-charge VAT (Bezugsteuer) for the buyer.
Capital tax: a TSA does not directly change capital tax, but recurring cash flows affect liquidity and therefore the potential need to finance integration.
Withholding tax: for services rendered by foreign companies without a permanent establishment in Switzerland, there is generally no obligation to withhold 35% on service fees — a rate reserved mainly for dividends, interest, and certain intellectual property rights. Quellensteuer obligations may apply if the provider is an individual with employment income or falls within particular cases under the Withholding Tax Act (DBG/LIFD) (e.g. activities performed in Switzerland by artists or speakers), with cantonal rates varying. In every case, assess reverse-charge VAT (Bezugsteuer), tax treaties, and any permanent establishment.
Operational checklist for CFOs and business owners
Before signing the TSA and throughout its term, verify at least these points:
- 1.Alignment with the SPA: the TSA must not contradict warranties, indemnities, or non-compete clauses already agreed.
- 2.Service inventory: detailed list with owner, KPIs, and target decommissioning date for each line item.
- 3.Monthly budget: 12–24 month TSA projection integrated into post-deal cash flow.
- 4.Accounts and cost centers: dedicated accounting codes to isolate transition costs in internal reporting.
- 5.Data protection: clauses compliant with the FADP (LPD) for shared access to customer, employee, and supplier data.
- 6.Audit and governance: if the buyer exceeds ordinary audit thresholds, document intra-group TSAs for the auditor.
- 7.Accounting software: record TSA invoices with monthly accrual and attach cost-plus detail for each settlement.
Manage the TSA as an integration lever, not an inevitable cost
A well-negotiated and monitored Transition Services Agreement enables a Swiss buyer to stabilize operations without indefinitely postponing independence. Correct accounting — period costs, separation from acquisition expenses, transparent reporting — gives management and stakeholders a realistic view of post-deal profitability.
With an exit plan per service, documented tariffs, and systematic tracking in accounting, the TSA becomes a measurable transition tool. Software such as Accountex facilitates accrual-based recognition, cost control by center, and preparation of the information required at year-end and during audit, when transitional costs must be clearly distinguishable from the definitive operating structure.