Negotiating SAP Contracts During Acquisitions: 5 Proven Tactics
Mergers and acquisitions (M&A) often trigger a showdown with SAP over contracts and licenses.
SAP views these corporate changes as opportunities for revenue growth, prompting clients to consider relicensing, price increases, or compliance crackdowns.
If you’re an IT leader or procurement professional, you know an M&A event can suddenly put you in SAP’s crosshairs with multi-million euro demands. Read our guide for a full overview of all SAP Licensing & Mergers and Acquisitions risks.
The only way to prevent cost escalation is savvy negotiation.
This guide shares five proven tactics for negotiating SAP contracts in M&A scenarios, focusing on neutralizing SAP’s leverage and protecting your budget.
Why focus on SAP contracts during M&A? Because SAP’s default contract clauses (like Change of Control terms and narrow affiliate definitions) favor the vendor.
Without proactive negotiation, an otherwise successful merger could saddle your organization with duplicate licenses, higher fees, or even compliance penalties.
By approaching SAP contract talks as a strategic defensive exercise, you can control costs and mitigate risk during the transition.
Let’s dive into the tactics – based on real-world experience from the negotiating table – that can help you counter SAP’s pressure during acquisitions and mergers.
Read about the risks – SAP Change of Control Clauses Explained: Risks in M&A Deals.
Why SAP Pressures Enterprises During M&A
When a merger or acquisition is announced, SAP often applies pressure for one reason: revenue. M&A events create uncertainty and changes in software usage, and SAP’s sales teams are trained to seize this moment.
Here’s why SAP turns up the heat:
- Opportunity for Revenue Uplift: SAP sees a chance to sell more licenses or “re-license” existing ones under new terms. A larger combined company might have a bigger SAP footprint, and SAP will push to monetize that growth. Without pushback, they might impose a price uplift or require you to buy new licenses for the acquired entity.
- Change-of-Control Clauses: Many SAP contracts contain Change of Control or assignment clauses that require SAP’s consent if your company is acquired or merged. This means the contract could be reopened or even terminated if ownership changes. SAP can use this clause to insist on signing a new agreement (often with higher costs or less favorable terms) as a condition for allowing the merger’s SAP usage to continue.
- Affiliate Limits: By default, SAP licenses are tied to a specific legal entity and its named affiliates as of the contract date. If you acquire a new subsidiary that wasn’t named or covered, SAP may argue that the new entity’s usage isn’t authorized. They leverage these affiliate restrictions to demand fresh licenses for the acquired operations.
- Compliance Leverage: M&A transitions are chaotic. Systems integrate, user counts fluctuate, and license assignments blur. SAP may schedule a license audit or scrutinize compliance at a time when you’re busy integrating businesses. Any compliance gaps (like unlicensed users or indirect access from the merger) can be used as pressure: “Buy more licenses now, or face penalties.”
- Timing Advantage: SAP knows that during an acquisition, enterprises are eager to avoid disruptions. The looming threat of shutting down critical SAP systems due to contract issues puts you on the defensive. SAP’s negotiators may use tight timelines (e.g., needing resolution before the merger close or before quarter-end) to push you into a quick agreement that favors them.
In short, SAP leverages contractual fine print and timing to turn M&A events into profit opportunities. The key takeaway: without active negotiation, your company could face steep costs and licensing headaches post-merger.
Thankfully, each of the tactics below is designed to counter these pressures and keep the upper hand in your SAP contract negotiations during acquisitions.
Read about the risks – SAP Change of Control Clauses Explained: Risks in M&A Deals.
Tactic #1 — Continuity Clauses
One of the most powerful tools in an SAP M&A negotiation is a continuity clause.
This clause ensures that your existing SAP contract terms remain intact in the event of a merger or acquisition, without automatically triggering a renegotiation or resetting of conditions.
Essentially, it’s a contractual guarantee of business-as-usual for your SAP licenses despite a change in corporate structure.
What are continuity clauses?
In plain English, they modify the standard change-of-control terms. Instead of SAP having free rein to terminate or alter the agreement when your company is acquired or merged, a continuity clause stipulates that the contract remains in effect, binding on any successor entity.
It may explicitly state that mergers, acquisitions, or internal reorganizations will not constitute a breach or require new licensing, provided that the new entity is essentially a continuation of the original customer. This protects you from SAP using the event as an excuse to jack up prices or force a contract overhaul.
How to use it:
If you have an M&A on the horizon (or even as a preventive measure in your current SAP contract), negotiate to insert continuity language.
Work with legal counsel to draft wording such as: “This agreement shall remain in full force and effect in the event of any merger, acquisition, or change in control of Customer, and SAP consents to the assignment of this agreement to any successor or acquiring entity.” This kind of clause preemptively robs SAP of the “change of control” leverage.
Real-world example:
One European company faced a massive €12 million “relicensing” claim from SAP after it acquired a smaller firm. SAP argued that the acquisition nullified volume discounts and required the new combined entity to re-license under current (more expensive) pricing. However, the company’s savvy procurement team had previously included a continuity clause in its SAP contract.
They pointed to this clause and successfully argued that existing prices and terms should be carried forward.
SAP’s €12M claim evaporated – the contract continuity meant the supplier had no contractual basis to demand relicense fees. In the end, the company continued operations post-acquisition without incurring any additional costs, all thanks to foresight in negotiation.
Practical tip: Even if SAP resists adding a broad continuity clause, push for at least a clause that permits assignment to an affiliate or successor, with SAP’s pre-approval not to be unreasonably withheld.
This way, SAP contract continuity is more likely. The bottom line is that continuity clauses keep your old pricing and rights locked in, preventing SAP from using an acquisition as a reset button on your deal.
Tactic #2 — Affiliate and Subsidiary Coverage
Who is allowed to use your SAP software under your contract? The answer lies in the definition of “Customer” or “Licensee” and its affiliates in the agreement.
Broadening the affiliate coverage in your SAP contract is a tactic that can significantly reduce costs when acquisitions occur.
The problem: Standard SAP contracts often narrowly define affiliates (if they allow affiliate use at all). Sometimes, only subsidiaries that are more than 50% owned and specifically listed are covered.
Any new subsidiary or acquired company may fall outside this definition, meaning they are technically not licensed to use the parent company’s SAP systems. SAP can then insist that the new acquisition purchase its licenses or expand the contract, often at a premium rate.
Affiliate coverage as a tactic: During negotiation, aim to expand the definition of affiliates and subsidiaries covered by the license.
For example, include language that extends usage rights to any current or future entity under your control, or any entity in which your company holds a significant ownership stake (e.g., “any entity in which Customer directly or indirectly owns more than 50% of the voting equity”).
The goal is to make sure if you buy a company next year, that company’s employees can use your SAP system without immediately triggering a licensing event.
Example scenario:
A procurement leader at a manufacturing firm anticipated several acquisitions in the pipeline. He negotiated an amendment to SAP’s contract that explicitly added a broad affiliate clause. Later, when the firm acquired a new subsidiary, SAP initially demanded a fresh set of licenses for 500 new users at the acquired plant.
But the expanded affiliate coverage meant those users were considered part of the licensed entity.
SAP’s claim had no bite – the new subsidiary’s users were already covered under the existing contract. This move saved roughly 25% in projected license costs, as the company avoided buying duplicate licenses for the acquired operation.
Practical language:
When pushing for affiliate coverage, consider phrasing like: “‘Customer’ shall include any present or future majority-owned subsidiaries or affiliates of Customer. Use of the Software by such affiliates shall be deemed authorized under this agreement, provided Customer remains responsible for compliance.” This ensures contract flexibility for growth.
It prevents SAP from exploiting technicalities when your corporate family expands. Without it, every acquisition could become a fresh revenue stream for SAP at your expense.
Tactic #3 — Benchmarking and Market Leverage
Knowledge is power in negotiation – especially when SAP proposes hefty fees or an expensive contract revision.
Benchmarking and leveraging alternative vendors are tactics that equip you to push back on SAP’s terms by showing you have options and data on your side.
Use peer benchmarks: Before entering any negotiation, gather intelligence on what other companies are paying and the terms they have secured from SAP, especially in M&A situations. What discount percentage do similar-sized enterprises get? How have others handled post-merger licensing?
By having these benchmarks, you can counter SAP’s price uplift demands with facts.
For instance, if SAP says, “Your new combined company must pay 30% more for licenses,” you might respond, “Our market research shows companies of our size negotiate deeper discounts after growth.
We know peers who obtained 50% off the list price when consolidating licenses.” This not only justifies why you shouldn’t pay more, but also flips the script to suggest why SAP should perhaps charge less per unit, given your new scale.
Leverage alternative suppliers: Even if you plan to stick with SAP, never let them think they’re your only option. Subtly remind SAP that you have choices. In an M&A context, this could mean evaluating other ERP or cloud solutions for the acquired business or threatened migration if the terms aren’t favorable.
For example, mention that you’re considering moving the acquired division’s CRM to Salesforce, or that Oracle and Workday are eager to pitch solutions for the combined company.
The mere implication that portions of your IT footprint could shift to a competitor gives SAP a strong incentive to be more flexible. They fear losing their footprint in the new organization.
Example of market leverage in action:
An automotive company merging with a competitor faced a steep increase in licensing fees from SAP – an €5 million uplift for aligning the two firms’ SAP contracts. The CIO’s team came prepared with both benchmarking data and a plan B.
They presented SAP representatives with anonymized data showing that the proposed price per user was significantly above industry averages. They also let slip that Oracle had approached the merged company with an offer for a cloud ERP deal.
That management was willing to consider it for certain divisions if SAP’s terms weren’t reasonable.
Faced with a knowledgeable customer, SAP quickly dropped the €5M uplift demand and instead offered to consolidate the contracts with no net increase and even a slight discount on future purchases. The fear of losing a big client (now even bigger after the merger) to a competitor forced SAP to concede.
Bottom line:
Do your homework and don’t be shy about your leverage. Benchmark SAP’s offer against the market to determine if you’re overpaying. And let SAP know – diplomatically – that you’re not married to their solution for every piece of the new business. Options equal power. Used wisely, this tactic can save millions and extract concessions that wouldn’t be offered to a passive, captive customer.
Tactic #4 — Limiting Audit Leverage
Few things strike fear into IT departments like the word “audit.” SAP’s license audits can feel like surprise inspections where any infraction leads to a fine (or pressure to buy more licenses).
During M&A, you need to prevent SAP from using audits as a sledgehammer in negotiations. The tactic here is to limit SAP’s audit leverage through the use of timing and scope controls.
Why audits pose a threat in M&A:
When two companies merge, their SAP usage often becomes more complex. Users from one side might start using the other’s system, integrations cause additional access, and license counts can temporarily exceed entitlements. SAP knows this.
Their auditors might swoop in during the transition, hoping to find compliance gaps. Those gaps become negotiation ammunition: “You’re out of compliance by 300 users; that’ll be €X million, unless you purchase this new agreement…”
Negotiating audit limitations:
During contract talks (ideally as part of the merger planning), negotiate constraints on audits.
This can take several forms:
- Audit Freeze Period: Request a clause or written assurance that SAP will not audit for a defined grace period during and after the acquisition integration (e.g., no audits for 12–18 months post-close). This gives you breathing room to consolidate systems and licenses without having to look over your shoulder.
- Limited Scope Audits: If SAP insists on the right to audit, negotiate scope limitations to ensure a mutually beneficial agreement. For example, exclude the newly integrated environments from audit scrutiny until after full integration, or agree that any findings during the grace period will not trigger penalties as long as you have a remediation plan.
- Audit by Agreement Only: In some cases, customers have negotiated that SAP will not initiate an audit without mutual agreement during certain sensitive periods. This is challenging to obtain, but even an informal email from your SAP account manager, promising not to audit during the transition, can be helpful (though not legally binding, it sets clear expectations).
Example:
A global IT team recognized that integrating the users of a recently acquired company into their SAP environment would temporarily exceed their license count. To avoid giving SAP an opening, they negotiated an “audit pause” for 18 months as part of a broader contract update.
This was written as a side letter, in which SAP agreed not to exercise its audit rights for 18 months after the acquisition date, provided the customer would engage in good-faith efforts to reconcile licenses by the end. During that period, despite an internal count showing they were 200 users over, SAP stayed away.
The IT team methodically cleaned up duplicate accounts, retired unused licenses, and purchased a modest expansion to cover the rest – all on their timeline. By the time SAP’s next audit came, the company was in full compliance.
They avoided a potentially nasty compliance showdown at the worst possible time (mid-integration) by proactively defusing the audit threat.
Takeaway:
Never let an audit ambush you during an M&A transaction. Use negotiations to buy time and establish ground rules.
Even if SAP won’t include it in the contract, obtain an explicit understanding regarding audit delays or leniency. This removes a huge pressure point and keeps the playing field level while you sort out post-merger licensing.
Tactic #5 — Negotiating Transition Grace Periods
Merging two organizations’ SAP environments is not an overnight task. Yet SAP’s typical stance is “day one, you must be fully licensed and compliant for the new combined entity.” That’s often impractical and unfair.
The solution is to negotiate a transition grace period – a buffer window during which the new, merged entity can use SAP systems without immediate relicensing or compliance penalties.
What is a transition grace period?
It’s an agreed period (commonly 6 to 12 months, sometimes longer for big mergers) where SAP essentially says, “We know you’re combining businesses. We won’t enforce certain license requirements or will allow temporary use of each other’s systems without new licenses, until this period ends.” This is usually coupled with a plan that by the end of the grace period, you’ll either true-up licenses or move to a new contract covering everyone.
Why you need it:
Imagine you acquire a company that also runs SAP. On day one after closing, technically, each company’s employees aren’t licensed to use the other’s SAP system. However, business needs may require immediate cross-access (for example, your sales team needs data from the acquired company’s SAP).
Without a grace period, you’re in a bind: either halt integration (not feasible) or quickly buy expensive short-term licenses. A grace period legalizes this interim usage. Similarly, suppose only one side has SAP and you plan to roll it out to the new unit.
In that case, a grace period allows new users to start using SAP immediately, with the understanding that licenses will be reconciled after the integration is complete.
Example scenario:
In one merger, SAP initially informed the customer that they had to license an additional 1,000 users immediately because the newly acquired division’s staff were accessing SAP. The customer pushed back and negotiated a 12-month transition period in writing.
During those 12 months, the acquired division’s employees were permitted to utilize the parent company’s SAP environment under the parent’s licenses, incurring no additional fees. In exchange, the company committed to provide SAP with an integration plan and agree on a license true-up by the end of the period.
This grace period prevented an immediate multi-million-euro purchase. It also gave the IT team time to determine how many users they needed long-term (many roles changed or systems consolidated in that year, reducing the eventual license count required).
By month 12, they only needed to add half the users SAP originally estimated, and they negotiated a fair price for those in the final contract. The grace period thus ensured a smooth integration without knee-jerk spending.
Key tip: Obtain any transition allowances in writing – ideally as a contract addendum or, at the very least, an official email from SAP.
Verbal assurances from a sales rep that “we’ll give you some time” are not enough. Define the length of the grace period and its terms (what is allowed, any reporting required, etc.).
With a clear buffer in place, you can merge at a sensible pace, align licensing strategically, and avoid being pressured into a rushed purchase.
5 SAP Negotiation Tactics vs. Business Impact
Let’s recap the five tactics and how each directly impacts your business in an M&A context.
The table below summarizes the tactic, its purpose, and the tangible business outcome when executed well, along with example results drawn from real negotiation outcomes:
| Tactic | Description | Business Impact | Example Outcome |
|---|---|---|---|
| Continuity Clauses | Keep old pricing and terms post-M&A. Prevent contracts from resetting due to change of control. | Prevents forced relicensing; preserves existing discounts. | €12M saved by avoiding a relicense fee after a merger (contract carried over unchanged). |
| Affiliate Coverage | Include future subsidiaries/affiliates under the license umbrella. | Avoids double licensing and new purchases for acquired units. | 25% cost avoided by covering an acquired company’s users under the parent contract. |
| Benchmarking | Use market data and alternative vendors as leverage in negotiation. | Pressures SAP to offer competitive pricing and terms. | €5M uplift avoided after showing SAP their proposal was above market and hinting at Oracle as an alternative. |
| Audit Limits | Restrict audit scope or timing during the integration period. | Reduces compliance risk and removes a pressure tactic. | 18-month audit grace secured, preventing surprise audits during a complex merger integration. |
| Transition Grace Periods | Delay enforcement of new license requirements; allow interim cross-use of systems. | Enables smooth integration without immediate cost spikes. | 12-month transition won to unify systems, avoiding an upfront purchase for temporary needs. |
Each of these tactics addresses a specific way SAP might try to exploit an acquisition.
In combination, they form a robust defense strategy that can significantly blunt SAP’s leverage.
Next, we’ll examine how these tactics come together in a scenario and provide a handy checklist and recommendations for your next SAP-involved M&A deal.
Example Scenario — Negotiation Cuts SAP Uplift by 30%
To illustrate how powerful these tactics can be, consider a simulated case of a merger negotiation with SAP:
Scenario:
Company A (an SAP customer) acquires Company B (also an SAP customer). Upon learning of the deal, SAP claims that the merged entity must relicense and proposes a new contract with a €20 million increase in costs over the next few years.
This uplift includes higher maintenance fees for integrating the two SAP landscapes.
Tactics Applied: The IT and procurement leaders don’t accept this at face value. They employ all five tactics:
- Continuity Clause: They point out a continuity clause in Company A’s contract (secured in an earlier negotiation), which states the contract remains valid through acquisitions. This undermines SAP’s push for an all-new agreement at higher rates.
- Affiliate Coverage: They ensure that Company B’s users can be counted as affiliates under Company A’s contract during the transition, so existing licenses can be shared legally. This means no immediate need to buy licenses just because users belong to “different companies” now under one roof.
- Benchmarking & Alternatives: Before meeting SAP, the team gathered data showing that similar mergers resulted in at most a 10% cost increase – not 30% as SAP was demanding. They also have quotes from a cloud competitor ready. In negotiations, they cite these figures and mention that certain non-SAP systems could replace some functions if a reasonable deal isn’t reached.
- Audit Limit: They proactively request (and get) a commitment that SAP will hold off any license audits for one year during integration. This removes the fear factor of a compliance bombshell while talks are ongoing.
- Grace Period: They negotiate a formal 12-month grace period allowing both companies’ employees reciprocal access to each other’s SAP systems without new licenses, to maintain operations while a unified system is planned.
Outcome: SAP, faced with a confident customer armed with protections and options, backs down from the €20M demand. Instead, they agree to a more modest contract adjustment: a smaller €14M increase tied to actual growth in users and a move to S/4HANA down the line.
In other words, the negotiation reduced the uplift by 30% (saving €6M) and spread the remaining costs over a longer timeline, aligning with the company’s integration plan. Additionally, the customer secured updated terms (such as broader affiliate rights and the agreed-upon audit grace period) in writing, fortifying their position for the future.
The merged company emerged with continuity of SAP service, no surprise bills, and a far more palatable contract – all because the team leveraged the five tactics instead of passively accepting SAP’s first proposal.
Negotiation Checklist for SAP M&A Deals
Every merger or acquisition involving SAP should follow a disciplined preparation process. Use the following checklist to ensure you cover all the negotiation essentials before and during discussions with SAP:
- Review existing SAP contracts for Change of Control triggers: Identify any clauses about mergers, acquisitions, or assignments. Know where SAP has contractual leverage so you can address it head-on.
- Insert continuity and affiliate coverage clauses (or confirm they exist): If you have the opportunity (e.g., negotiating new terms or an amendment), ensure that continuity of contract and broad affiliate usage rights are in place before the merger is completed.
- Collect benchmarks and market data before negotiating: Research what similar companies have negotiated with SAP in M&A contexts. Gather any data on pricing, discounts, or special terms. Also, line up potential alternative solutions (even if just for leverage).
- Demand audit restrictions during the transition period: Discuss with SAP upfront that you expect breathing room – no surprise audits or compliance traps while integration is ongoing. Try to get this in writing for a defined period.
- Secure a transition grace period for license true-up: Agree on a reasonable timeframe after close to finalize licensing arrangements. Ensure that it’s documented that, during this grace period, both sets of users can operate on each other’s systems (or however your integration flows) without requiring immediate new licensing.
Checking off these items will significantly improve your chances of a smooth SAP experience during a merger. It transforms the negotiation from a reactive scramble into a proactive strategy.
5 Recommendations for IT & Procurement Leaders
Finally, beyond the specific tactics and checklist, here are five high-level recommendations for any IT procurement leader dealing with SAP in an M&A situation. Think of these as guiding principles to shape your overall approach:
- Start SAP conversations early in the M&A process: Don’t wait until after the deal is signed to determine licensing requirements. Engage your SAP account team with a plan as soon as the acquisition is likely to occur (under NDA if necessary). Early negotiation can secure concessions before SAP’s end-of-quarter deadlines or internal pressures take effect.
- Treat continuity and affiliate coverage as non-negotiable guardrails: When crafting or updating contracts, make continuity clauses and expansive affiliate definitions red lines. If SAP resists, emphasize that these clauses enable a long-term partnership – you need flexibility to grow or restructure without penalty.
- Use benchmarks and competitive leverage aggressively: Come to the table armed with data. If SAP’s offer isn’t aligning with market norms, call it out. Likewise, don’t be shy about mentioning that you’re evaluating other solutions (even if switching is a last resort). Being informed and assertive earns respect and better deals.
- Insist on audit-free transition periods: This should be a standard ask in any M&A negotiation with SAP. Make the case that a no-audit period benefits both sides (you avoid panic buying, SAP avoids straining the relationship). Most importantly, it keeps everyone focused on a long-term solution rather than short-term gotchas.
- Build SAP contract flexibility into every deal (future-proofing): Whether or not you have an M&A on the horizon now, assume that one could happen. Structure your SAP agreements with maximum flexibility – from subscription terms to user definitions – so that when change comes, you’re already prepared. It’s much easier to negotiate protections before an acquisition is announced than when you’re in the heat of it.
By following these recommendations, IT and procurement leaders can shift the dynamic: you become the strategist steering the SAP conversation, rather than the reactive target of SAP’s sales tactics.
Mergers and acquisitions will always be a flashpoint with big vendors. Still, with the right approach, you can turn these situations into opportunities to improve your SAP agreements, rather than letting them become cost traps.
FAQ
Why does SAP push relicensing after acquisitions?
SAP often pushes for relicensing because an acquisition can technically void or alter the scope of the original license agreement. The vendor views it as an opportunity to renegotiate the contract. For example, suppose Company A, on SAP, acquires Company B. In that case, SAP might argue that Company B’s use of SAP isn’t covered, and both need to migrate to a new consolidated license (usually at a higher cost). Essentially, SAP uses M&A as a trigger to generate additional license sales or move customers to newer products/pricing. It’s also a way for SAP to ensure the combined entity’s usage is fully compliant under one agreement – but unfortunately, that “compliance” push is tied to revenue goals. Without negotiation, customers might end up paying for duplicate or updated licenses that they don’t truly need.
Can continuity clauses fully protect enterprises?
A well-crafted continuity clause is a strong shield against potential disputes.
Still, it’s not a silver bullet for every scenario. Continuity clauses ensure your contract and pricing stay in effect after a merger or acquisition, preventing SAP from unilaterally terminating the deal. This means you keep your discounts and terms, which provides significant protection.
However, continuity clauses typically don’t give you license to extend SAP software to entirely new user populations indefinitely – you might still need to buy additional users if you suddenly have thousands more employees, for example.
And continuity clauses won’t automatically cover an acquired company’s separate SAP system (that might require consolidation or an affiliate clause). In short, continuity clauses protect you from losing the deal you already have. Still, you must combine them with other tactics (like affiliate coverage and grace periods) to cover all bases.
They are a critical component of the defense, and most enterprises consider them a must-have in any SAP contract, even if there is a remote chance of an M&A transaction.
How can affiliates and subsidiaries be covered under SAP contracts?
Covering affiliates under SAP contracts usually involves explicitly defining “Customer” to include those affiliates.
There are two main approaches:
- Broad Definition in the Contract: Modify the contract’s definitions section to state that any entity that you control, or any future subsidiaries, is included as an authorized user of the software. For example, “Customer shall include XYZ Corp and any entity, now or in the future, that is directly or indirectly controlled by XYZ Corp.” This blanket inclusion is ideal because it automatically covers new acquisitions (as soon as you own them, they qualify).
- Listing or Schedule of Affiliates: Some contracts allow for a schedule that lists named affiliate companies, which are authorized to use the software. You would need to update this list whenever you acquire a company. It’s more manual, and you have to remember to add the new subsidiary promptly (and inform SAP).
In both cases, it’s wise to also ensure that any affiliate using the software is under the same compliance rules (so you remain accountable for license counts). By broadly including subsidiaries, you eliminate SAP’s ability to say “those users aren’t allowed” when you make an acquisition. It makes your SAP license more like an enterprise agreement covering a whole group of companies rather than just one legal entity.
What benchmarks are most useful against SAP demands?
When SAP is demanding something in an M&A negotiation (be it extra fees, more licenses, or a move to a different product), useful benchmarks include:
- Peer Pricing: What discount off SAP’s price list do similar-sized companies (or recent mergers) get? For instance, if you know companies with 50,000 SAP users pay 60% off list, and your combined company will have 50,000 users, you should target that discount.
- Previous Deals: If you have access to recent SAP deals (perhaps through a consultant or industry group), use those as anonymous examples. E.g., “A Fortune 500 in our industry merged last year and SAP granted a 1-year grace period with only a 10% increase in maintenance – why are we being asked for 25%?”
- Alternate Solutions Costs: What would it cost to go elsewhere? If SAP wants €10 million, could Oracle do it for €7 million? If yes, that’s a compelling data point. Even if you don’t intend to switch, knowing that SAP’s ask is above a competitor’s quote strengthens your negotiating position.
- Audit Statistics: Know the typical outcomes of SAP audits (e.g., many companies negotiate down findings or get a free pass if they commit to an upgrade). This helps you push back on doomsday compliance claims by SAP. You can say, “We’re aware that when indirect access issues arise, SAP often resolves it via a modest add-on sale, not a gigantic penalty – let’s be reasonable here.”
In summary, the best benchmarks are ones that directly counter whatever SAP is asking for – showing that their proposal is either above market norms or that you have financially viable alternatives.
What is a realistic grace period in SAP negotiations?
The length of a transition grace period can vary, but 6 to 12 months is common in practice. Many companies successfully negotiate a one-year grace period after an M&A event. In cases of very large or complex mergers, 18 months might be attainable, especially if you can justify why integration will take that long.
SAP will rarely agree to anything beyond 18 months in writing, as they want to close the loop and start charging for the new scope. However, even if you only get 6 months formally, you might informally stretch it – as long as you communicate progress to SAP, they might be flexible if you slightly run over time. Always ask for a bit more than you think you need (“We’d like 12 months”) because you can negotiate down if needed (“Alright, we’ll accept 9 months”).
Be sure to clearly define the start and end of the grace period (e.g., from the legal close of the acquisition or the date users from the acquired company first access SAP). In short, aim for a year; settle for at least 6 months solid.
Any grace period is better than none – it removes immediate pressure and allows for a thoughtful plan instead of a fire drill on the first day of the merger.
