Document type: Checklist Practice area: Corporate — Mergers and Acquisitions Jurisdiction: United States (federal and state), with cross-border notes Last reviewed: 5 September 2026

How to use this checklist

Section 1 is seller readiness and should be complete before a process starts. Sections 2 through 8 are execution. Section 9 is day one. Sections 10 and 11 are the two years afterward.

Items marked [CRITICAL PATH] are the ones that most often delay a closing or determine whether the separation succeeds.

1. Seller readiness (before the process)

  • Perimeter defined internally and written down: product lines, customers, plants, people, contracts, intellectual property.
  • Carve-out financial statements produced; audit timeline assessed if audited statements will be required. [CRITICAL PATH]
  • Seller's own standalone cost estimate built bottom-up, function by function.
  • Stranded cost model built: shared cost absorbed by the business, portion eliminable, timetable, one-time cost. [CRITICAL PATH]
  • Shared contract inventory complete, with transfer, assignment, and change-of-control restrictions flagged.
  • Inbound license inventory complete, with transfer language reviewed for each — because the structure may breach them. [CRITICAL PATH]
  • IT separation approach selected (clone-and-divide / extract-and-implement / continue-on-seller-systems) with an estimated duration.
  • Separation management office stood up: full-time lead, workstream leads, integrated plan, weekly steering committee.
  • Retention plan designed and funding agreed before announcement.
  • Communications plan sequenced: employees, customers, suppliers, regulators.

2. Structure

  • Options evaluated: equity sale of existing entities; asset sale; reorganization-then-equity-sale; spin-off under 26 U.S.C. § 355.
  • Reorganization tax cost modeled in every jurisdiction: transfer taxes, VAT, stamp duties, capital gains on intercompany transfers, withholding. [CRITICAL PATH]
  • Inbound licenses reviewed against the chosen structure — recalling that an internal reorganization alone can breach a license under Cincom Systems, Inc. v. Novelis Corp., 581 F.3d 431 (6th Cir. 2009) and the non-assignability principle of PPG Industries, Inc. v. Guardian Industries Corp., 597 F.2d 1090 (6th Cir. 1979). [CRITICAL PATH]
  • Trademark license transferability assessed, consistent with In re XMH Corp., 647 F.3d 690 (7th Cir. 2011).
  • Employment transfer consequences of each internal step assessed in automatic-transfer jurisdictions.
  • Permit and registration consequences of each internal step assessed.
  • Tax attributes (NOLs, credits, basis) addressed.
  • Entity formation timelines confirmed per jurisdiction; local director/officer residency requirements identified.
  • Bank account opening timelines confirmed. [CRITICAL PATH in some jurisdictions]

3. Perimeter, assets, and liabilities

  • Assets scheduled by name, with a residual "primarily related to" standard used only as a sweep. [CRITICAL PATH]
  • Liabilities scheduled by category: litigation, environmental, product liability by period, employee claims, tax periods.
  • Shared assets identified and allocated, with usage arrangements where both need them.
  • Excluded assets and excluded liabilities listed expressly.
  • Wrong-pockets provision included, with a 12–24 month window and no additional consideration.
  • Intercompany balances to be settled or eliminated at closing.
  • Intercompany agreements to be terminated, and those to be continued, listed.
  • Informal, undocumented intercompany supply arrangements identified — these become the reverse TSA. [CRITICAL PATH]

4. Contracts

  • Every shared contract triaged into one of four buckets, with owner and target date:
    • Assign in whole (with consent)
    • Split or partially assign (requires counterparty cooperation)
    • Retain and pass through (check for breach; set a sunset)
    • Terminate and replace (quantify the pricing dis-synergy)
  • Consent requirement determined for each; change-of-control clauses reviewed separately from assignment clauses.
  • Consent process started before signing. [CRITICAL PATH]
  • Consent costs allocated in the purchase agreement.
  • Alternative arrangement drafted for non-obtained consents: benefit held for the buyer, performance at the buyer's direction and cost, sunset, and a price consequence only for identified material contracts.
  • Customer contracts: notification, assignment or novation, and requalification requirements identified.
  • Supplier contracts: replacement pricing quantified at the buyer's scale.
  • Leases: landlord consents, subleases, shared facilities agreements. [CRITICAL PATH]
  • Government contracts: novation process started. [CRITICAL PATH]

5. Intellectual property

  • Patent assignments in writing and recorded under 35 U.S.C. § 261.
  • Trademark assignments include the goodwill of the business, as 15 U.S.C. § 1060 requires — an assignment in gross is invalid.
  • Copyright transfers in a signed writing under 17 U.S.C. § 204.
  • Transferred IP schedule: registrations by number and jurisdiction; unregistered marks; trade secrets and know-how; software; domains; social accounts.
  • Retained IP licensed to the buyer: field of use, exclusivity, sublicensing, improvements, term, territory.
  • Transferred IP licensed back to the seller: same terms, mirrored.
  • Transitional trademark license with quality control provisions, a rebranding milestone plan, and a hard sunset.
  • Every inbound license: transfers or not; consent needed; licensor repricing expected; replacement available.
  • Open source analysis re-run for the standalone entity.
  • Domain names, code repositories, and developer accounts transferred.

6. People

  • Employee population identified: dedicated, shared services, matrixed, split-time. Expect a multi-week list negotiation.
  • Offer terms agreed: base, bonus opportunity, prior service credit, severance protection period.
  • WARN, 29 U.S.C. § 2101, and state mini-WARN analysis run before the offer list is final. [CRITICAL PATH]
  • Health continuation responsibility under 29 U.S.C. § 1161 allocated for employees not hired.
  • Qualified plan treatment determined: spin-off, asset and liability transfer, or distributable event — under the definitions of 26 U.S.C. § 414.
  • Non-qualified deferred compensation, equity awards, and accrued vacation addressed.
  • Works council information and consultation started in automatic-transfer jurisdictions. [CRITICAL PATH — frequently determines the closing date]
  • Retention pool funded, allocated between the parties, with clawback terms — before announcement.
  • Leadership hiring plan for functions the parent provided (CEO, CFO, GC, HR).
  • Immigration and work authorization consequences of the employer change assessed.

7. Financial

  • Carve-out financial statements prepared; allocation methodology stated and disclosed.
  • Intercompany transactions and their pricing disclosed.
  • Standalone cost model built bottom-up by function, not by adjusting the allocation. [CRITICAL PATH]
  • Three-number bridge documented: allocated cost → TSA cost → standalone cost. [CRITICAL PATH]
  • One-time separation costs modeled: IT, rebranding, recruiting, fit-out, duplicate running costs, advisory fees.
  • Quality of earnings analysis commissioned; allocation completeness, working capital normalization, and non-arm's-length transactions tested.
  • Working capital target computed using the same methodology as the closing statement, with consistent treatment of eliminated intercompany balances.
  • Stranded cost plan on the sell side, with elimination timetable and one-time cost.

8. IT and data

  • Separation approach confirmed and duration estimated. [CRITICAL PATH — sets the TSA term]
  • Full inventory: ERP; email and domains; network at shared sites; identity and access management; endpoint management; security tooling and monitoring; backup and disaster recovery; data warehouse; product-embedded software and update infrastructure; customer portals; EDI connections; telephony.
  • Enterprise license consequences addressed — the business ceases to be an affiliate at closing; vendor agreement to TSA-period use obtained and repricing budgeted.
  • Data extraction scope defined: customers, vendors, materials, orders, history, master data.
  • Cross-border personal data transfer mechanism in place for the transfer and for the shared-systems period.
  • Data deletion obligations explicit, deadlined, and certified on both sides.
  • Cybersecurity coverage continuous across the transition — no gap between the seller's monitoring stopping and the buyer's starting.

9. Regulatory

  • HSR notification, 15 U.S.C. § 18a, assessed against the carve-out perimeter.
  • Where the divestiture is a remedy, standalone viability documented for the agency.
  • Environmental permits: transfer, reissuance, or shared-permit arrangement. [CRITICAL PATH]
  • Product and facility registrations (FDA establishment listings, device registrations, etc.) transferred or refiled. [CRITICAL PATH]
  • Export licenses and registrations addressed.
  • Financial services, transport, and state licenses addressed.
  • Quality system and product certifications reissued to the new entity.
  • Customer requalification of the supplier's new legal identity started early — it can interrupt revenue. [CRITICAL PATH]
  • Data protection registrations and records of processing updated.

10. TSA

  • Schedules drafted by the service owners, not by counsel. [CRITICAL PATH]
  • One schedule per service with: description; performer; volume assumptions and out-of-scope treatment; buyer dependencies; systems; personnel; price and basis; duration and extensions; service level and measurement; exit deliverables.
  • Pricing basis agreed; third-party costs passed through at actual.
  • Escalation over time built in deliberately to motivate exit.
  • Duration set per service, with IT longest; extension notice, premium, and an outside date.
  • Service levels benchmarked to the seller's own historical internal performance in the prior twelve months.
  • Remedies and liability cap understood — service credits and a fee multiple, not consequential damages.
  • Exit provisions: termination for convenience on notice without penalty; migration plan with milestones; data extraction in a usable format with a deadline; knowledge transfer and personnel access.
  • Governance: named contacts, escalation path, and a standing meeting.
  • Reverse TSA scoped — what does the retained business receive from the divested one?
  • Seller creditworthiness assessed if the seller is distressed; prepayment, escrow, or step-in rights considered.

11. Day one

  • Legal: entities formed and in good standing; boards and officers appointed; signature authority; contracts assigned or in alternative arrangements; approvals obtained or interim arrangements documented; insurance bound in the new entity's name.
  • Finance: bank accounts open and funded; payment and receipt capability; chart of accounts; opening balance sheet; tax registrations; payroll running; able to invoice customers and pay suppliers on day one.
  • People: offers accepted and start dates confirmed; payroll set up; benefits effective; system access provisioned; leadership in place.
  • IT: email working; network access; core applications available; help desk answering; security monitoring continuous.
  • Operations: materials flowing; production running; logistics arranged; quality systems in the new entity's name.
  • Commercial: customers notified; purchase orders redirected; pricing and terms confirmed; sales force able to quote and sell.
  • Communications: all audiences addressed on the planned sequence.
  • Readiness dashboard run to closure by function, green/amber/red, weekly for the final eight weeks.
  • Standard met: nobody outside the company notices anything.

12. The first two years

  • Months 1–3: stabilize; weekly TSA governance; issues log with owners and dates; migration workstreams started immediately, not after a rest period.
  • Months 3–12: IT implementation; standalone function hiring; pass-through contract replacement; rebranding completed before the transitional license sunset; TSA services exited individually as each becomes unnecessary.
  • Months 12–24: final exits; data extraction complete; deletion certified both ways; termination documented.
  • Wrong-pockets items logged and transferred in batches.
  • Extension requests anticipated: granted at a premium in exchange for a milestone-based migration plan.
  • Knowledge captured from seller personnel who understood the business inside the parent, before they are reassigned or leave.
  • Purchase price adjustment finalized and escrow released.
  • Post-mortem: what the standalone cost actually turned out to be, versus the model.

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This checklist is general information, not legal advice, and does not create an attorney-client relationship.