Outsourcing the M&A back-office headache

Opting out of TSAs and in-house integration

In both divestitures and acquisitions, managing the back-office transition puts a significant burden on precious resources during M&A deal structuring and post-close execution. Outsourcing can be an attractive alternative to Transition Services Agreements (TSAs) and in-house integration, providing a reliable, cost-effective back-office solution that can free up resources and help you achieve the goals of your M&A deal more quickly.

Back-office integration challenges in divestitures and acquisitions

Continuation of back-office services and support is essential to the success of most acquisitions and divestitures. Traditionally, M&A negotiations for divestiture result in a Transition Service Agreements (TSAs), basically a commitment on the part of the seller to continue back-office services and support for a specified length of time after closing. Acquisitions pose a slight different challenge, requiring continuation of services and support while integrating IT platforms and divergent back-office processes. In both cases, scale benefits are typically sacrificed or delayed during the transition.

An outsourcing partner can provide key benefits, including:

  • Ready resources who are experienced with M&A back-office transitions and can enable more rapid integration for acquisitions or ramp up separate new back-office services quickly for a divestiture
  • Cost/performance synergies from a provider who can update or re-platform divergent applications and processes onto a common set, potentially reducing infrastructure and maintenance costs
  • The opportunity to train your entire team on one modern, leading-practice approach, potentially improving new application development and maintenance
  • An increase in the time by which synergy benefits of operations are achieved.

TSAs—Importance and challenges

Top organizational benefits of Outsourcing

Deloitte’s Global Outsourcing Survey 2016 reveals that around 45 percent of respondents see outsourcing as a key enabler of M&A activity. Organizations surveyed used outsourcing to deliver different benefits for acquisitions and divestitures.

Back-office outsourcing for M&A: Worth exploring

In the past, outsourcing has been considered within the context of M&A activity once stabilization has been achieved, and then with the primary objective being to develop new service delivery models and reducing operating expenses. Given the many benefits of adopting this model early in the M&A transaction, outsourcing can accelerate deal benefits for both the Buyer and the Seller and should be considered as an important option within any M&A transaction.

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