A strategic buyer wants to acquire only our customer list and intellectual property through an asset sale, leaving behind our administrative staff and brand. How do we structure a transition services agreement to protect our remaining employees and prevent wind-down liabilities from eating our proceeds?

Question

Tyler Smith · Accepted Answer

A strategic buyer who only wants your customers and IP is looking to capture high-margin synergies while leaving you to deal with the messy reality of shutting down your corporate entity. If you do not structure this transition carefully, the severance packages, lease termination fees, and administrative wind-down costs can quickly consume your cash at close.

To protect your cash and your team, you must negotiate a robust Transition Services Agreement, or TSA, as a core condition of the deal. The TSA must require the buyer to pay you a monthly fee to keep your administrative staff and systems active during the transition period. This fee should cover all overhead, including payroll, benefits, and software licenses, plus a reasonable administrative margin.

Additionally, structure the transaction so the buyer must offer employment to a designated percentage of your operating team. For the team members who will not transition, require the buyer to fund a retention and severance pool as part of the overall transaction structure.

Use your Accountability Chart to identify the critical staff needed to execute the transition and tie their retention bonuses to specific timeline milestones. By documenting these operational requirements upfront, you prevent the buyer from dumping the administrative burden onto you for free. Do not let the buyer cherry-pick the assets while leaving you with all the liabilities. Make the funding of your team's transition an explicit line item in the purchase price allocation.