SAP Licensing in Mergers and Acquisitions

SAP Licensing in Mergers and Acquisitions

Mergers, acquisitions, and divestitures present complex challenges related to SAP software licensing.

When companies combine or split, they must reconcile their use of SAP’s ERP and cloud products, ranging from classic on-premise SAP ECC or S/4HANA to cloud services like SuccessFactors, Ariba, Concur, Fieldglass, and SAP BTP.

A successful M&A transaction involves integrating business operations and requires careful handling of SAP license contracts to avoid compliance issues, service disruptions, and unexpected fees.

This article offers practical guidance for CIOs, procurement leaders, enterprise architects, and M&A teams on navigating SAP licensing during corporate restructuring.

We will cover how licensing is affected in common scenarios (mergers, acquisitions of SAP or non-SAP users, and divestitures/carve-outs), address both technical and contractual considerations (from transferring licenses and contract novation to user consolidation and audits), and recommend strategies – including key contract clauses and negotiation tactics – to ensure a smooth transition.

The goal is to help you plan and negotiate effectively so an M&A event doesn’t become a costly SAP licensing pitfall.

Pre-M&A Considerations and Due Diligence

Start early: It’s crucial to review your SAP license position and contractual terms as soon as an M&A deal is imminent.

Do this in the early planning or due diligence phase.

Key steps include:

• Gather and Review Contracts: Inventory all SAP agreements of the companies involved. Look for assignment, change of control, affiliates, or divestiture clauses. These clauses outline the consequences if the customer’s ownership changes or if a business unit is sold. Understanding these terms upfront will reveal how much flexibility you have or where you’ll need SAP’s consent​. Review the subscription agreements for transfer or termination provisions for cloud subscriptions, as these often have fixed terms.
• Assess License Compliance: Conduct an internal license audit for each SAP-using entity or request recent SAP audit reports to verify compliance. Verify current usage against entitlements. The aim is to identify any existing compliance gaps before SAP does. If Company A is acquiring Company B, ensure that B isn’t in a state of under-licensing or indirect usage exposure, because the new owner will inherit those compliance liabilities​after the acquisition. Any unresolved licensing issues (e.g., 100 unlicensed users or a misconfigured indirect interface) could result in a post-deal surprise if SAP audits are conducted. It’s wise to address these issues with the seller beforehand – either have them remediate (e.g,. purchase needed licenses) or adjust the deal price to account for the risk.
• Contractual “Homework”: Identify if any contract termination or consent triggers apply. Some SAP contracts include a clause that the agreement terminates upon a change of ownership or merger (this is uncommon but possible). More often, contracts require SAP’s written consent to the assignment. As a buyer, you want to know if SAP can use the change of control to force the contract to be re-signed on new terms. If you’re a seller divesting a unit, check if the contract allows any portion of use to be transferred or if all rights remain with the original company. Knowing these details guides your negotiation approach with SAP.
• Engage Experts: Consider hiring a software licensing expert or SAP licensing consultancy early. These advisors can analyze contract language, spot hidden pitfalls, and help develop a game plan. They also know what concessions SAP has given in similar M&A deals, which can strengthen your negotiation position. Their cost is usually far lower than the potential compliance penalties or unwarranted purchases you might incur by going it alone​. Similarly, involve your legal counsel with IT licensing expertise to interpret any ambiguous clauses and ensure the SPA (Sale and Purchase Agreement) between companies addresses software licenses (e.g., representations that the seller complies with or provisions for transitional access).
• Internal Strategy Before Talking to SAP: It’s usually wise to inform SAP of major corporate changes (they will find out anyway via public news or their sales contacts), but plan your strategy internally first. Determine the target state for IT integration: Will the acquired company be integrated into the parent’s SAP system? Will two SAP landscapes run in parallel for a period of time? Will the spin-off need a clone of the parent’s system or a completely new SAP setup? Outline your ideal outcomes (e.g., “After the merger, we want one unified S/4HANA contract covering both companies” or “After selling this division, we want to allow 12 months of transition access”). This clarity enables you to approach SAP with a clear request rather than merely reacting to their proposals.

SAP License Transferability Rules

Licenses don’t automatically follow a merger or sale.

SAP’s standard policy is that licenses are tied to a specific legal entity (the contracting “Licensee”) and its named affiliates, and they cannot be transferred to a new owner or entity without SAP’s approval​.

In practical terms, when Company A merges with or acquires Company B, A cannot simply start using B’s SAP licenses or vice versa, just because “now we’re one company.”

Likewise, if part of Company A is carved out and sold, that spin-off can’t assume it has the right to continue using A’s SAP systems without arrangements.

Some key points to understand:

• On-Premise (Perpetual) Licenses: Traditional SAP ERP licenses (like those for ECC or on-premise S/4HANA) are usually perpetual licenses sold to a specific company. The contract’s assignment clause typically forbids transferring those licenses to any other entity without SAP’s consent. Even within a corporate group, you can’t split license counts between two companies after separation unless SAP agrees. If a business unit using SAP is divested and is no longer an affiliate of the original licensee, it legally has no right to use that SAP software once it leaves the group. The licenses remain with the original company; the new entity must negotiate a separate agreement to use SAP.
• Cloud Subscriptions: For cloud services (SuccessFactors, Ariba, Concur, Fieldglass, SAP Business Technology Platform, etc.), the non-transfer rule is just as strict. Cloud subscriptions are tied to the customer who subscribes and are typically priced based on the number of users or usage spend. You cannot “split” a cloud subscription – if part of the company is spun off, those users can’t keep using the parent’s cloud contract indefinitely. There’s no concept of partial assignment. Instead, the spin-off (or acquiring company) would need to either novate the entire cloud agreement to its name (if SAP allows) or sign a new subscription for its portion. SAP will require separate tenants or environments for each company post-divorce, due to data privacy and contractual reasons. For example, if a division using SuccessFactors is sold, a new SuccessFactors instance is typically set up for the new company, and data is migrated over. The original contract can only be transferred if SAP explicitly agrees to swap the customer of record (and this usually only happens if the entire environment goes with the sale).
• Assignment by Law vs. By Contract: Mergers often legally consolidate companies, but SAP’s contracts don’t automatically consolidate. After a merger, you may have one surviving legal entity, but two sets of SAP contracts remain bound by their original terms. The acquiring company is a different legal entity in other cases (like an asset sale). Either way, SAP believes that without their consent, license rights do not “travel” from seller to buyer or automatically expand to cover a new combined entity​. SAP’s consent is almost always required to move or reassign licenses across entities.
• SAP Approval and Novation: Obtaining SAP’s approval typically involves signing a contract amendment or novation agreement. A novation is a legal mechanism where SAP agrees to transfer an existing contract to a new party (for example, changing the customer name to the acquirer’s name). In an M&A context, SAP might allow the novation of a contract if the acquirer takes over the whole SAP installation of the target. However, SAP may view this as an opportunity to update terms (they might not simply carry over a very favorable discount the target had without renegotiation). It’s not uncommon for SAP to say: “We consent to the assignment, but we’ll do so by signing a new license agreement with the buyer.” This new agreement could encompass the scope of the old one, but often with adjustments to pricing or the product mix.
• “Non-Transferable” = Must Re-license if Not Managed: If you bypass SAP’s approval and just let a new entity use SAP software, you’re in breach of contract. SAP has enforced this by requiring companies to re-license software after the fact or face compliance penalties. For instance, if Company A sells Division X and fails to inform SAP, but Division X continues to use Company A’s SAP system, an audit could reveal that the usage is unauthorized. SAP could then demand that the new Company X purchase its licenses (likely at a premium since it’s now a smaller customer) and potentially penalize Company A for “software misuse.” A real-world example involved a manufacturer that sold a division, which continued to access the parent’s SAP ECC system post-closing. SAP later flagged that all such access was technically unlicensed once the division left the parent’s corporate structure. The new company had to urgently buy its own SAP licenses, and the parent violated the agreement by not allowing access. The lesson: Never assume a solid business can keep using your SAP indefinitely without a plan.

SAP’s default stance is rigidity: licenses stick to the original contracting entity. You must negotiate and document an arrangement with SAP to deviate from that.

The following sections outline how to handle specific scenarios within these rules and the potential leeway available.

Handling Common M&A Scenarios and Their Licensing Implications

Every M&A situation differs, but most fall into a few common scenarios.

Below, we discuss how SAP licensing is typically handled in each case and what to watch out for.

Scenario 1: Two SAP Customers Merge

When two companies that already use SAP merge (either via merger or one acquires the other), the combined entity now owns two separate sets of SAP licenses and contracts.

Intuitively, one might think the new, larger company can pool or use those assets interchangeably, but that is not automatically allowed.

Each original SAP environment was licensed under terms that limited use to a specific company and its affiliates as they existed before the merger.

Post-merger, unless and until you consolidate those contracts, each system should only be used by the users for whom it was originally licensed.

Key considerations in this scenario:

• Keep Systems Separate Initially: Mergers don’t instantly integrate IT. Often, each company continues operating its own SAP system for a transitional period. During this time, avoid cross-usage of SAP systems without proper licensing. That means Company A’s legacy SAP system should only be used by A’s original users, and Company B’s system should be used by B’s users, even if they are now under one parent firm. If some employees need to access each other’s systems (common when business units start working together), you must account for that. The safest approach is to treat it like an affiliate extending use: for example, if B’s employees need to go into A’s system, ensure A’s contract has an affiliate use provision covering subsidiaries and consider purchasing additional named-user licenses under A’s contract to cover those B employees. (Likewise for A’s employees on B’s system.) This is essentially a stop-gap. You should notify SAP in such cases and/or get a short-term agreement if the cross-use is significant. Do not just share login accounts or let 200B users onto A’s system “unofficially” – that’s a compliance violation waiting to happen (a real merged company learned this the hard way when an SAP audit found 200 such users and levied $1.5M in fees​).
• Plan to Consolidate Contracts: To enable a merged SAP environment, you will likely need to negotiate a consolidated license agreement with SAP that covers the combined usage of the merged entity. This could be achieved by amending one of the existing contracts to include the other company and its usage rights, or by signing a new contract that supersedes both old ones. SAP often prefers to start anew with a new agreement, especially if this presents an opportunity to transition the customer to newer products or cloud subscriptions (for instance, SAP might propose a unified contract if both companies transition to S/4HANA or RISE with SAP during the process). SAP will treat this as a revenue opportunity, not a free merge. Simply combining contracts may involve buying additional licenses to cover new shortfalls and reconciling maintenance streams. However, you can also leverage the situation to your advantage, which we’ll cover in the negotiation section. Approach SAP proactively to negotiate terms that recognize your combined status. You should aim for an outcome where the new contract provides at least as much capability as the two separate ones did, ideally more, without simply doubling the cost.
• License Metric Differences: Merging two SAP customers can reveal inconsistencies in how each was licensed. One company might have licenses measured by the number of named users. At the same time, the other used an engine metric (e.g., transactions or orders), or one might have a bundle like a Sector-specific solution, while the other has modular licenses. These will need harmonization. In a consolidation negotiation, SAP may suggest converting one set of metrics to the other or moving both to the latest license model (for example, converting legacy ERP licenses to S/4HANA licensing). Use the consolidation to eliminate any outdated or unnecessary licenses. If Company A has a SAP component that you plan to retire, you might negotiate to remove it from the new contract. Conversely, if one contract had especially favorable terms (large discounts or user-friendly definitions), try to carry those into the new deal. It’s a complex exercise – involving your SAP account team and possibly third-party licensing experts to model the combined entitlements – but it’s necessary for a clean go-forward state.
• Avoiding Redundant Costs: One advantage of a merger is the potential to eliminate redundant licenses (e.g., both companies had licensed 500 users each, but after the merger, you only have 800 actual users, not 1000). Theoretically, you shouldn’t have to keep paying SAP maintenance on licenses you don’t need. In practice, SAP is reluctant to relinquish maintenance revenue. They won’t typically allow you to drop licenses mid-contract without penalty. However, you can negotiate: for example, you might “trade in” those surplus licenses as credit toward expanded usage of another product, or negotiate that as part of moving to S/4HANA or an enterprise agreement, whereby the unused licenses are terminated or their support fees are waived. Some companies have negotiated one-time maintenance credits or at least avoided a support cost increase during consolidation​. This often requires a give-and-take (buying some new licenses or extending the term in exchange for retiring old ones). Keep an eye on support fee calculations – if both firms were paying SAP 22% support on their license base, ensure SAP isn’t double-counting the base after the merger. They should base maintenance on the net new combined license footprint, not the sum of two separate footprints. If overlapping licenses are credited, support should drop accordingly.

Pitfall to avoid: Failing to address licensing post-merger can be very costly. An example (a composite of real cases) is a large corporation that merged with a competitor but allowed each division to run its SAP system separately for years, with some staff accessing both systems informally.

When SAP audited, the unauthorized cross-usage led to a substantial compliance bill, and the company realized it had been paying maintenance for thousands of “excess” users it didn’t need.

They ended up with a forced contract consolidation on SAP’s terms. The clear lesson is to proactively integrate and optimize SAP licenses as part of the merger plan rather than ignore them.

Scenario 2: SAP Customer Acquires a Non-SAP Company

In this scenario, Company A already uses SAP and acquires Company B, which does not use SAP (possibly because B uses another ERP or no formal system).

Here, no second SAP contract is involved – you’re essentially just expanding SAP to new users or new business operations.

This is generally the simplest case from a licensing perspective, but there are still important considerations:

• Affiliate Usage and True-Up: Most SAP license agreements permit the licensee and its majority-owned affiliates to use the software, provided they have purchased sufficient licenses for those users. When Company B becomes a subsidiary of A (or is merged into A), B’s users can be given legal access to A’s SAP system under the affiliate clause without needing a separate contract. However, you must ensure you have enough license counts to cover them. This typically means conducting a “license true-up” for additional Named Users or additional modules. For example, suppose you acquire 200 employees who will now use SAP. In that case, you may need to buy 200 more user licenses of the appropriate type (e.g., Employee Self-Service users, Professional users, etc., depending on their role). If the acquired business adds new SAP functionality (say, you decide to start using SAP’s Warehouse Management because B has warehouses), you might need to license that module anew. The key is to quantify the scope of the increase, such as the number of new users, additional data volume, or new SAP modules, and then purchase the necessary increments, ideally timed with the acquisition.
• Leverage Contract Terms: Check if your current SAP contract includes pre-negotiated pricing for additional users or if it operates under a flexible model. Your contract often lists a price per user or discount tier. If acquiring B pushes your total users into a higher bracket (making you a bigger SAP customer), ask for better pricing on the incremental licenses. You may already have a discount schedule (e.g., 0–500 users at 40% off, 501–1000 users at 50% off). Ensure SAP applies the higher discount if you’ve crossed a threshold. Even if not, as a now larger organization, you can negotiate a new discount on the additional licenses – SAP’s sales team will view an acquisition as an opportunity to sell more, so you have some leverage to secure volume pricing.
• Timing and Interim Compliance: Ideally, align the new license purchases to be effective on Day 1 when the acquired employees start using SAP. If that’s not feasible (sometimes deals close quickly, and you can’t sign a license order in advance), try to get a short-term agreement from SAP for the interim or at least prioritize procuring those licenses immediately post-close. You want to avoid a situation where 200 new users start using SAP without licenses – even if they are now your affiliates, using SAP beyond licensed counts is a compliance issue. SAP does monitor customer growth, and a sudden spike in user count could trigger questions or an audit. It’s wise to give SAP a heads-up: “We acquired X Co. and will be adding Y new users – we plan to purchase additional licenses by [date].” Transparency can stave off audit triggers as long as you follow through.
• Integration Delay: If the acquired company will continue operating on its systems for a while (i.e., you’re not integrating B onto your SAP immediately), you might not need new SAP licenses immediately. In that case, you have time to plan the license addition for when the integration happens. Some companies use this delay to bundle the license expansion with their next annual negotiation to get a better package deal. However, keep in mind that if B is running a different ERP and you plan to migrate them to SAP eventually, consider whether you’re maintaining two systems longer than necessary. From a licensing view, there’s no extra cost until you move them onto SAP (aside from perhaps maintaining B’s legacy system licenses). Hence, the urgency is lower – don’t forget to budget for it when it comes.

(Scenario 2 is relatively straightforward since it doesn’t involve contract transfers – it’s mostly about scaling up your existing SAP footprint. Still, be cautious: SAP might use the opportunity to pitch a broader deal or even an upgrade to S/4HANA “since you’re expanding anyway.” If that aligns with your IT roadmap, it could be worth considering; if not, you can stick to just buying what you need.)

Scenario 3: Non-SAP Company Acquires an SAP Customer

This is essentially the reverse of Scenario 2 and often the trickiest scenario: Company A does not use SAP, and it acquires Company B, which is running SAP.

Suddenly, as the new owner, Company A has an operation reliant on SAP software, but A has no existing contract or relationship with SAP.

Now, who has the right to use B’s SAP system?

If B remains a separate legal entity after acquisition and continues operating, at least the SAP contract is still in B’s name – but the change in ownership typically triggers assignment clauses. If B is absorbed or merged into A, then legally, B’s contract might need to be novated to A. Key steps and challenges:

• Review the Acquired Company’s SAP Contract: During due diligence (ideally before closing), scrutinize B’s SAP agreements for change-of-control provisions. Many SAP contracts state that a change in majority ownership or a merger requires SAP’s consent or that the contract is voidable upon such a change. If B had a relatively standard contract, SAP’s approval is likely needed for B to continue using SAP under the new ownership. Suppose A intends to merge B completely (no separate subsidiary). In that case, B’s contract must be assigned/novated to A or replaced, since B will cease to exist as a legal entity.
• Engage SAP for Consent (Novation): It is critical to contact SAP as the acquiring party and obtain written consent to keep using the software under B’s existing license or to novate the contract to A’s name. In practice, SAP will usually consent, but likely with conditions. They may require that you update the contract terms or even sign a new license agreement as the new owner​. Be prepared for SAP to drive a hard bargain here. For example, if B’s contract had a deep discount or a special deal, SAP might claim that those terms were granted to B as a specific customer and are not automatically transferable to A. They may propose new pricing or require a fresh deal at less favorable terms. As the buyer, you aim to maintain continuity (keep the business running on SAP without interruption) while not losing the value already paid for in those licenses. It’s often a negotiation: SAP might say, “We’ll novate the contract if you buy X more licenses or extend support,” and so on. One strategy is to insist that the acquisition shouldn’t disadvantage you – the licenses were fully paid for, and you expect to inherit them. At the same time, unless you have an alternative system ready, SAP is aware that you need it, which can reduce your leverage.
• Interim Use Agreement: If time is tight, consider negotiating a short-term allowance. For instance, SAP might agree not to terminate B’s contract on a change of control, giving you a grace period (e.g., 6 months) to either sign a new agreement or transition off SAP. Real-world scenario: A buyer secured SAP’s permission to use the acquired company’s SAP system for 6 months post-acquisition, contingent upon signing a new contract within that timeframe. This buys time to evaluate options (whether to keep SAP or migrate away) and negotiate without the immediate threat of being unlicensed.
• Consider Alternatives for Leverage: If you, as a non-SAP company, can migrate the acquired operations to a different system (maybe you use Oracle, or you’re willing to invest in an alternative ERP), mention it. Even if you prefer to keep SAP, letting SAP know you have other options can make negotiations more reasonable​. Weigh the feasibility: sometimes, acquired operations can be migrated into your existing systems, which gives you a credible plan B. If SAP’s proposal is too expensive, you might decide to replace SAP in that unit. There are cases where companies have done this – for example, a spin-off or acquired unit switched to Oracle or Dynamics because SAP’s licensing deal for continuing was not acceptable. While that’s a big decision, having it as an option provides leverage.
• Successor Liability: Remember that as the new owner, you inherit any licensing sins of the acquired company. If B was out of compliance, SAP will hold you responsible now. It’s crucial to get a handle on B’s actual usage vs licenses (hence the due diligence audit). If you find the acquired SAP environment has compliance issues, get the seller to resolve them with SAP before handover or negotiate an adjustment (like an escrow or indemnity for license costs). Following the acquisition, any audit findings will be communicated to you. SAP doesn’t care that the miscount happened under previous ownership. Therefore, ensure the acquisition agreement includes representations and warranties regarding proper licensing – it won’t eliminate your responsibility to SAP. Still, it gives you recourse to claim against the seller if they misrepresented the state.
• Integration or Sunset Plans: If your plan is not to keep the acquired company on SAP long-term (for example, you intend to integrate the operations into your existing non-SAP system or retire SAP after extracting the necessary data), leverage this in negotiations. You might ask SAP for a shorter-term license to support the transition (say a 1-2 year term instead of a full perpetual purchase)​. If SAP knows you might discontinue use, they may prefer to get some revenue for a transitional deal rather than losing the customer entirely. On the other hand, if you intend to keep using SAP and perhaps even expand it to the rest of your company (this acquisition ironically makes you a new SAP customer enterprise-wide). SAP will be eager to sign you as a long-term customer. In that case, we are negotiating a new contract that covers both the acquired unit and potentially your broader business, which might yield good results (SAP gains a new customer in you).

This scenario often requires careful negotiation, as it begins from a position of non-compliance (the new owner has no license).

The positive side is that it can also be an opportunity for the acquiring company to restructure the agreement from scratch to fit their needs, as a new contract may be on the table.

Just go in with your eyes open. SAP will try to eliminate any especially sweet deal the acquired company had and bring things “in line” with their standard pricing.

Push back with the argument that value has already been paid, and you’re not starting from zero.

Scenario 4: Divestiture or Carve-Out of an SAP-Using Business

When a company that uses SAP decides to sell or spin off a business unit, it faces a big question: what happens to the SAP access and licenses that the unit was using?

Unlike acquisitions, where one entity tries to combine with another, we are separating one into two.

Let’s refer to them as ParentCo (the original company) and SpinCo (the portion being spun out).

Key points for divestitures:

• No Automatic Rights for SpinCo: By default, SpinCo (once it’s no longer an affiliate of ParentCo) has no legal right to use ParentCo’s SAP licenses. Even if SpinCo was, in practice, using SAP systems every day before, once it’s outside the corporate boundary, all that usage becomes unlicensed unless something is done. ParentCo can’t “give” or assign licenses to SpinCo unilaterally – that’s prohibited without SAP’s consent. This often surprises business leaders who assume that if they sell a division, the division “comes with” the IT systems. With SAP, it doesn’t unless you planned for it.
• Typical Outcomes: In a divestiture, there are usually two possible outcomes for the separated business’s SAP usage:
  1. SpinCo must obtain its own SAP licenses (via a new contract with SAP in SpinCo’s name).SpinCo continues using ParentCo’s SAP for a transitional period under a service arrangement (TSA) and obtains its solution.
  In many cases, it’s a mix: transitional use for X months, followed by a new system. Rarely, if negotiated upfront, a portion of ParentCo’s licenses might be transferred to SpinCo—we’ll discuss that next.
• Negotiate Carve-Out Rights Upfront: The best scenario is if ParentCo anticipated a possible sale and negotiated a carve-out clause in the SAP contract beforehand. Such a clause explicitly allows the transfer of certain licenses to a divested entity under defined conditions. For example, a contract might say, “If we divest a business, we can transfer up to 15% of user licenses to the new owner, with notice to SAP.” You must have this in writing with SAP beforehand – SAP is typically reluctant to include it. Still, large customers or those with negotiation leverage have succeeded in getting limited transfer rights. Having such a clause can save a lot of cost: SpinCo can take those licenses without buying afresh (they may start paying SAP directly for support). Example: One company negotiated the right to transfer a portion of its licenses and later spun off a subsidiary, transferring 300 SAP users to the new company under that term. The new company only had to pay SAP maintenance for those licenses (at the same discount level) instead of purchasing new licenses, and the parent stopped paying maintenance on them​. Both saved millions by avoiding duplicate spending. If you are currently in any SAP contract renewal or know a divestiture might be in your future, push for such provisions now – even if narrow, they are extremely valuable insurance.
• Transitional Service Agreements (TSAs): In most carve-outs, the seller agrees to provide certain IT services to the buyer after closing (typically 6-12 months) while the new company establishes its systems. SAP usage often falls under this. You need to legalize this arrangement with SAP. Without permission, allowing SpinCo employees to continue logging into ParentCo’s SAP after closing technically provides SAP access to a third party – a breach of license. To avoid that, negotiate a TSA usage clause or agreement. Ideally, your contract already has a TSA provision (sometimes called “divested entity use clause”) that says something like: “In the event of a divestiture, the divested business may continue to use the SAP software for up to __ months under a transitional services agreement with Customer.” If not, you should approach SAP before the deal closes to get a formal nod. SAP may offer a specific TSA license addendum or require a fee for extended use. Often, that fee is much smaller than a full re-license – think of it as renting the licenses for a few months. In one case, SAP charged a parent company a 20% one-time fee on the license value to allow a 12-month transition use for the divested unit. While not ideal, it prevented an immediate cutoff. If you negotiate upfront, you might avoid even that fee. The bottom line is to document any allowed post-separation usage, including its duration and scope, so you’re covered in the event of an audit.
• New Environment for SpinCo: Assuming SpinCo will ultimately have its own SAP, plan the cut-over. For on-premise, SpinCo might install its own SAP instance (perhaps a copy of Parent’s system) and then license it under a new contract. For cloud, SpinCo will need a new tenant for each cloud service it uses – e.g., a fresh SuccessFactors instance, Ariba realm, etc. Data migration and tenant setup can be time-consuming, so TSA periods are crucial. Note that cloud subscriptions can’t be partially split mid-term – SpinCo likely has to start a new subscription contract from scratch, and ParentCo might have to continue its contract until expiration. (For example, if Parent had a 3-year SuccessFactors deal for 10,000 users and SpinCo was 2,000 of those, Parent remains obligated for 10,000 users until renewal; at renewal, they can reduce but might lose volume discount​.Meanwhile, at its scale, SpinCo signs a new deal for 2,000 users.) This means there may be some inefficiency where, for a period, the parent is paying for users who are no longer there. It’s worth discussing a coordinated adjustment with SAP
  . Sometimes, if both parties are in discussions with SAP, they can align so that SpinCo’s new contract starts when ParentCo can reduce its count, minimizing double pay. However, SAP cannot relieve the parent of its subscription commitments.
• Shared Infrastructure Risks: This is very risky without explicit permission if ParentCo and SpinCo continue sharing one SAP system after the split (say, due to technical constraints). It may occur when splitting the system is challenging, so the buyer and seller agree that the seller will host the ERP for a year or two. If you do this, involve SAP and consider alternative approaches, such as SAP partner hosting. For instance, temporarily moving that part of the business onto an SAP partner’s cloud or SAP HEC/RISE, the partner or SAP essentially provides the licenses as part of the service​. This can serve as a bridge; although it might be costly every month, it offloads compliance responsibility to the hosting provider for that period. In any case, running a single production system serving two companies requires careful contractual cover.
• Fees and “Shakedown” Potential: Software vendors are aware that divestitures put customers in a bind. There’s a ticking clock to separate systems, and the buyer and seller must ensure that things continue to function properly. SAP often sees this as an opportunity for additional sales. They might demand the spin-off purchase new licenses at list price (since, as a new, smaller customer, SpinCo doesn’t have a volume discount history), or charge the parent a premium to extend usage for a few months​. They might even use the situation to bundle a larger deal (e.g., “We’ll allow this carve-out smoothly if the parent commits to a S/4HANA migration deal”). To avoid exploitation, prepare your negotiation stance by coordinating with the other party (buyer or seller) to approach SAP together, if possible, and demonstrate that you’re aligned and informed. Consider leveraging the prospect that SpinCo might choose a competitor’s software if SAP’s offer is unreasonable​. If SAP knows that pushing too hard could result in losing that new business entirely, they may be more flexible. Additionally, having alternative proposals (such as SpinCo evaluating Oracle or the parent considering third-party maintenance to reduce costs) can provide leverage in discussions.

Pitfalls to avoid in divestitures:

The most common mistake is not planning for SAP licensing until the very end or after the deal closes. This can lead to SpinCo being cut off from systems unexpectedly or a frantic, expensive scramble to legalize usage.

In one case, a company sold a division without any license transfer rights or TSA in place. Post–close, they had to pay SAP a significant fee to keep the systems running in the short term, and the spin-off, being smaller, ended up buying a new SAP license at a much higher per-user cost than the parent had enjoyed.

The parent was also stuck with unused licenses that it couldn’t drop immediately, and its support costs increased due to the lower volume, resulting in millions of dollars in value loss. All that could have been mitigated with some foresight in the contract or coordination with SAP.

Another pitfall is letting the TSA period lapse without fully separating – if, say, 12 months pass and SpinCo is still on the parent’s system without a written extension, both companies risk a compliance violation. Always diary and enforce the cutoff or formally extend the agreement with SAP.

SAP Contract Clause Checklist for M&A

Secure key clauses that provide flexibility to protect your organization in future M&A events (whether you’re negotiating a new SAP agreement or an amendment).

Here’s a checklist of contractual terms to consider negotiating in advance:

• Assignment and Change of Control: Ensure the contract explicitly addresses mergers or acquisitions. Ideally, include language that the agreement may be assigned to a surviving entity or an acquiring company with SAP’s consent, “not to be unreasonably withheld or delayed.” This prevents SAP from arbitrarily blocking a transfer. Additionally, note that the subscription can be transferred to a new owner under similar terms in cloud subscriptions. Many vendors agree that the contract will continue with the new entity if you merge into or are acquired by another company. Still, you want that in writing to avoid a renegotiation from scratch.
• Divestiture “Carve-Out” Rights: As discussed, negotiate a divestiture clause for the entity being divested. This could cover two things: (a) License Transfer Rights – e.g., the right to transfer a certain subset of licenses to a new owner if you sell a business unit (with notice to SAP). It’s extremely helpful even if SAP limits it (say up to X% of licenses, one-time use). (b) Transitional Use (TSA) Rights – allowing the departed entity to use your SAP system for a defined period (months) post-separation. Specify if any fees apply or if they are included. This clause means you won’t have to rush back to the negotiating table under duress during a divestiture – the rules are pre-set.
• Affiliate and Restructuring Flexibility: Ensure the definition of “Customer” or “Licensee” in the contract includes your affiliates (typically defined as entities in which you own more than 50% of the shares). Most SAP contracts do this, but it’s best to double-check. Additionally, if you anticipate internal restructurings (such as spinning off a subsidiary into a joint venture), verify whether the contract permits transfers among the customer’s group of companies. Sometimes, large enterprise agreements include provisions stating that if you split an affiliate off or absorb one, the licenses can remain in use as long as one of the original parties remains the guarantor. It’s not a standard clause, but large customers can negotiate it.
• Co-termination and Split of Support: If you have multiple SAP contracts or plan to merge contract portfolios, try to align end dates and support terms. Additionally, negotiate the terms for support fees if license volumes change due to mergers and acquisitions (M&A). For instance, you might seek a clause that states if user counts decrease due to a divestiture, maintenance fees will be adjusted proportionally or at least not increased in unit rate. SAP typically resists lowering maintenance, but you could at least insert that any divestiture will be treated as an allowed reduction event at the next anniversary. In cloud agreements, you may add that if some users leave (due to a sale), you can reduce the subscription count without penalty, provided a minimum notice is given. Even if SAP doesn’t fully agree, opening the discussion may lead to a side agreement when the time comes.
• Price Protections for M&A Events: This is subtle, but you could ask for an assurance that a merger will not trigger a mandatory repricing. SAP won’t guarantee that your discount will hold for a larger combined entity (or a smaller spin-off). Still, you can include a clause like “In the event of merger or acquisition, existing price discounts shall apply to additional licenses for a period of __ months,” or that the current price list remains valid. It allows you to purchase necessary licenses for new users under the existing terms before SAP potentially renegotiates them. Similarly, ensure that no clause grants SAP the right to terminate or renegotiate solely due to a change of control (strike any such language).
• Portability to Cloud or New Products: Occasionally, as part of an M&A-driven relicense, you may transition to new SAP solutions (e.g., adopting S/4HANA or SAP Cloud services). When negotiating, secure conversion rights so that your existing investment is recognized. For example, if you have ECC licenses and you negotiate as part of a merger to convert to S/4HANA, get credit for what you’ve already paid (SAP often has conversion programs – ensure the contract spells out how many S/4 licenses you get in exchange for retiring ECC licenses). This isn’t M&A-specific, but M&A often becomes the moment companies upgrade or overhaul systems, so protect your entitlements during that process.
• Audit and Compliance Clarity in Transitions: Although SAP’s audit clause is standard, you may want to clarify the approach during integration periods. For instance, if you merge, ask for a grace period (e.g., “SAP agrees not to audit for 12 months specifically on the merged usage, provided we are working in good faith to consolidate licenses”). SAP may not agree in writing, but even an informal email assurance is better than nothing. At a minimum, document any communications with SAP about allowed usage during the transition.

Not all of these will be achievable – SAP contracts are often quite strict. However, enterprise customers with significant clout or those renewing large deals have managed to insert M&A-friendly provisions.

The effort spent negotiating these clauses up front (even if the event never occurs) can save enormous hassle and future costs.

If you lack them and an M&A event occurs, you’ll have to negotiate with SAP from scratch, when your leverage may be weakened. So, where possible, build flexibility into the contract ahead of time.

Negotiation Tactics with SAP During M&A

Even if you don’t have all the ideal clauses in place, an M&A event puts you in a situation where you must negotiate with SAP to realign licenses.

How you approach these talks can significantly influence the outcome and cost.

Here are strategies and tactics for negotiating with SAP in the context of M&A:

• Engage SAP Proactively but On Your Terms: Don’t hide a merger or sale from SAP – they monitor press releases and will likely reach out when they hear of it. They should hear from you collaboratively first, then discover it, and enter audit mode. However, engage after completing your homework (contract review, internal assessment). When approaching SAP, frame the conversation as “We want to ensure continuity and compliance; let’s work on a mutually agreeable solution.” If it’s an acquisition, the buyer and seller sometimes approach SAP together to discuss transition arrangements. This unified front can prevent SAP from playing the two sides against each other. If it’s a merger, come with a clear plan: e.g., “We plan to consolidate systems in 1 year; in the interim, we’ll operate separately. We’d like to discuss a new contract covering the combined entity by next year. Here’s what we’re looking for…”. Setting the tone as partners solving a problem (rather than waiting for SAP to say, “You’re not allowed to do X”) can lead to a more constructive dialogue.
• Leverage Your New Scale or Strategic Importance: If the M&A makes your company larger, use that to negotiate better terms. A combined company is a bigger customer – you should get better volume discounts or more favorable price metrics. Specifically, if Company A had 1,000 users and Company B had 600 separately, each might have received 50% off the list price. However, as one of 1,600 users, you could push for a deeper discount on any new net licenses. Use benchmarks: what discount do companies of our new size typically get? Similarly, for cloud subscriptions, a larger subscription might qualify for enterprise pricing tiers. Let SAP know you expect recognition of your increased scale. Conversely, if a divestiture makes you smaller, prepare to guard against losing your discount – insist that historic pricing remains for remaining licenses (at least through the current term).
• Consider an Enterprise Agreement or Broader Deal: Vendors like SAP often respond favorably if you propose a bigger, multi-year deal as part of the M&A. For example, after a merger, you might suggest transitioning to an Enterprise License Agreement (ELA) or SAP’s RISE subscription, which covers the entire organization for several years. SAP prefers ELAs and long-term cloud commitments because they secure revenue. If it aligns with your IT strategy, this can be a win-win: you get simplified licensing and possibly a bulk discount, and SAP gets a long-term contract. A story from the industry: Two mid-sized SAP customers merged and used the occasion to negotiate a 7-year RISE with SAP deal covering the new combined company, resulting in a 30% lower overall cost than their previous separate expenditures. SAP was willing because it moved them to the cloud and ensured retention. Only pursue this option if it makes sense for your business (don’t get upsold on things you don’t need). However, if you were considering modernization, doing it at M&A time can yield additional incentives.
• Negotiate a “True-Up Holiday” or Grace Period: If combining systems will momentarily put you out of compliance (e.g., users from B using A’s system exceed A’s licenses), ask SAP for a short-term tolerance while things are sorted. You might formally request a 6-12 month grace period without auditing penalties, specifically to allow you to rationalize and true up licenses​. In exchange, present a plan: “We will purchase additional licenses or a new agreement by X date to cover the combined usage.” SAP may not give it in writing, but they might verbally agree to hold off an audit as long as progress is made. Many SAP representatives would prefer a cooperative true-up sale to a punitive audit fight, especially if they see a significant opportunity in the merged company. The key is not to ignore the compliance gap but to proactively address it with a plan and timeline.
• Resist Immediate “Buy Everything Now” Pressure: SAP’s sales team might insist that as soon as a merger happens, you must purchase licenses to cover any new usage immediately. While you do need to ensure compliance, how you achieve it is negotiable. For example, if you know you will retire one system in 12 months, you might not want to buy full licenses for those users for just a year. Perhaps a temporary license or just the TSA approach is enough. Don’t let a salesperson panic you into an unnecessary purchase. You can say, “Yes, we recognize we’ll need more licenses. We are evaluating the exact needs and may also consolidate systems. We intend to address this in a single agreement rather than piecemeal.” Then, negotiate that single agreement thoroughly.
• Use Third Parties and Benchmarking: During negotiations, you can gain leverage by knowing what other companies have gotten. Cite examples (without names) of known M&A deals: e.g., “We are aware of cases where SAP allowed a percentage of license transfer” or “companies our size got an enterprise deal at X% off.” This signals to SAP that you are an informed customer. You can even involve a third-party negotiator to interface with SAP – sometimes SAP will be more forthcoming with an experienced licensing consultant, as they know that person is familiar with SAP’s contractual wiggle room. Ensure any concessions or promises from SAP are documented (even if just an email summary of a call).
• Keep Options Open: As mentioned earlier, subtly remind SAP you have alternatives. For a spin-off, the alternative is choosing a different software for that entity. For a merged company, one alternative could be to delay or limit SAP usage – perhaps you could keep two systems separate for a longer period (not ideal for operations, but feasible) or consider third-party support (maintenance) for one system to save costs. You don’t need to make threats – a gentle statement like “We’re evaluating all options, including non-SAP solutions for the new business, if we can’t reach a workable arrangement” can suffice​. SAP sales reps are keenly aware of competition; if they sense you’re not completely captive, they often become more flexible on pricing and terms.
• Timing and Quarter-End Pressures: Plan the negotiation timing to your advantage. Software companies have quarterly and annual targets. For instance, if your merger is happening in Q3, you might get a better deal if you aim to close a licensing agreement by SAP’s Q4 end, when they want big wins. Also consider if any SAP promotion programs are running (e.g., incentives for S/4HANA conversion before year-end). That said, don’t let their timing force you into a bad deal – use it to get a sweeter offer on your terms. Also, coordinate between the selling and buying parties in a divestiture so that SAP doesn’t double-dip you. Ideally, come to SAP with an agreed-upon plan on how licenses will be split or purchased, rather than each side separately negotiating (which could result in an overlap or contradictory commitments).
• Maintain Executive-Level Dialogue: If it’s a sizable deal, involve your and SAP account executives early. A CIO-to-SAP conversation setting mutual expectations can help, for example, “We value SAP and want to continue post-merger, but we need this to be economically viable. We’re looking for SAP’s support to make this transition smooth.” Establishing that positive tone at a high level can sometimes temper the aggressive sales tactics at lower levels. Conversely, executive pressure (“We might escalate to SAP’s global account management”) can spur a stalled negotiation if things aren’t going well.

In summary, negotiate with confidence and information. SAP will come to the table to maximize their revenue from the situation; you need to come with a clear understanding of your requirements, knowledge of your contractual rights, and a willingness to push back and explore creative solutions.

Many companies have navigated this successfully, emerging with either a fair deal or even improved terms (like modernizing their licensing) as part of an M&A.

The worst approach is to do nothing and accept whatever SAP says—that’s when surprise fees and unfavorable contracts occur.

Post-Merger Integration and License Management Tips

The work isn’t over once the dust settles on the M&A transaction and you’ve negotiated the necessary agreements with SAP.

It’s about implementation and ongoing management to ensure you remain compliant and optimize your SAP landscape for the new corporate structure.

Here are some post-deal tips:

• Document the New License Structure: Ensure that all paperwork from your negotiations is well-organized and stored securely. This includes novation agreements, contract amendments, new license keys, updated user schedules, and other related documents. For example, if Company B’s licenses were officially transferred to Company A, keep that novation letter on file​. If SAP gave a written nod for 6 months of shared use, save that email or addendum. Having clear documentation will prevent confusion later about what was agreed upon. It’s wise to create a summary sheet of “who now owns what licenses under which contract,” especially if multiple contracts were consolidated.
• Conduct a License Inventory and Reconciliation: After merging, thoroughly inventory all SAP products and licenses the new entity possesses​. List what Company A, Company B had, and what the new contract covers. Ensure nothing fell through the cracks – e.g., did you account for that SAP CRM component B was using? Are all the user types properly merged? This inventory helps validate that your new entitlements match or exceed the sum of the old ones. It also helps identify duplicate or overlapping entitlements that you might retire in the future.
• Deploy Strong Internal Controls: With multiple systems or a newly combined user base, it’s crucial to implement governance to prevent accidental misuse. For instance, if you intend to run two ERPs until they are fully integrated, set up a process: any user who needs access to both systems must be licensed on both and tracked accordingly. Don’t allow ad-hoc account sharing or “I’ll just give you access to my system” favors between teams. Ensure that the license management team approves post-merger, cross-system access as part of your IT access management. Also, if a spin-off happens, ensure that as of the cut-off date, the spin-off’s user accounts in your system are deactivated and no new ones are created. In short, enforce the boundaries agreed upon in the licensing plan. This may involve updating your SAM tools or scripts to regularly audit user lists and cross-check them with HR organization charts (to determine if any users from Company B are still active in Company A’s system beyond the allowed period, for example).
• Monitor Usage and Stay Audit-Ready: After an M&A, SAP may be more likely to audit you (since they are aware of the changes that have occurred). Be prepared by closely monitoring your usage. If you consolidate contracts, familiarize yourself with any new metrics (e.g., if you transition to an S/4HANA contract with digital access documents being counted, keep an eye on that). Do periodic internal audits – maybe 6 months post-merger – to ensure no unintended overuse. Maintain logs during transitions: e.g., track which IDs from old Company B accessed A’s system and ensure they were properly counted, etc. This level of record-keeping can protect you in the event of an audit dispute. It shows that you were diligent in only allowing what was agreed upon.
• Address Any Data Access Needs with Ex-Entities: In a divestiture, often months after separation, the new company might realize it needs historical data from the old SAP system (for legal or reporting reasons). Accessing that can be a violation if not covered. It’s best to provide the separated entity with an archive or extract of the data they’ll need. However, if they genuinely require ongoing read-access to your system, consider setting up a limited arrangement (e.g., a read-only account for 3 months) and obtain SAP’s written approval for that specific scenario. The same applies to you accessing their new system if needed. Just because you were once part of a single company doesn’t mean you can freely exchange SAP access later – treat it as third-party access and obtain permission.
• Clean Up and Optimize User Licensing: Mergers are an ideal opportunity to review and update the user roster. Eliminate duplicate user accounts, standardize license roles across the new organization, and ensure you’re not over-provisioning high-level licenses to people who don’t need them. For example, if each company had its license classification for users, harmonize those under a single scheme in the new contract (perhaps you negotiated that all Finance users are now classified as “Professional Users” under S/4HANA). Retire accounts of employees who might have left during the upheaval. This not only keeps you compliant but can reveal spare licenses.
• Maintenance Consolidation: If you end up with a single unified maintenance contract, verify that the support fees are accurately adjusted. If you still have two maintenance streams (perhaps you temporarily kept two contracts), plan to consolidate them at the next renewal to avoid paying two sets of minimum maintenance or duplicate support services. If one part of the company is now on a different support model (e.g., one was on SAP standard support, while another is on enterprise support), we should decide on a single approach as we advance and align it.
• Watch Cloud Renewals: Post-M&A, when cloud subscriptions come up for renewal, use that chance to right-size. For a merger, perhaps you can get a combined renewal with a bigger commitment (for a discount). For a divestiture, when the parent’s contract renews, ensure they’ve removed the spun-off users and try to avoid penalties for reducing volume – you might have negotiated that already, but if not, at renewal, fight for at least keeping your prior discount level, even if volumes dropped (argue that the drop was due to divestiture, not because you chose to scale down usage).
• Continued Communication: If you divest a business, keep open communication with the IT team for a while. Sometimes, issues surface later (like “we found out a system feed still sends data to the old SAP system”). A cooperative relationship can help resolve these without SAP involvement (or with a joint approach to SAP if needed). Similarly, within a merged company, regularly communicate licensing dos and don’ts to project teams. For instance, if an IT team wants to integrate System A and System B, they should loop in license management to ensure it doesn’t trigger unexpected indirect access fees.
• Long-Term License Strategy: Use the post-M&A period to revisit your overall SAP strategy. You’ve just been through a major change – is now the time to consider future changes? For example, if you consolidate and upgrade to S/4HANA as part of the integration, plan how that sets the stage for the next 5-7 years. If you end up with more cloud subscriptions, consider establishing a center of excellence for managing cloud licenses. If a spin-off has left you with excess licenses, you may anticipate growth that’ll allow you to reuse them, or you may negotiate a termination at some point. Consider whether your current SAP footprint is optimal for your new business size and structure. Also, reflect on lessons learned – perhaps you’ll negotiate even better M&A clauses in your next SAP contract renewal or keep a closer watch on usage to avoid any compliance drift.

Finally, document everything for posterity​. M&A can also involve personnel changes – people who negotiated the deal may move on.

Those who inherit the SAP administration must understand what was done (e.g., “We have approval for X until December, then we must stop that usage”). A well-documented license transition plan becomes part of your IT governance.

Common Pitfalls and How to Avoid Them

To wrap up, here’s a summary of common pitfalls companies face with SAP licensing in M&A and tips to avoid them:

• Assuming “we’re one company now, so all SAP use is fine.”
  Avoidance: Never assume license rights automatically merge. Always get SAP’s approval or a new contract before combining SAP environments​. Until then, keep usage siloed per the original contract or formally extend the license scope.
• Not involving SAP early (or at all).
  Avoidance: Even though it may be an awkward conversation, engage SAP account management early, after you have internally planned. If SAP discovers an unannounced merger via an audit, they’ll be far less forgiving. Being proactive (with a plan) can turn SAP into an ally in structuring a solution rather than an adversary catching you non-compliant.
• Ignoring the assignment clauses in contracts.
  Avoidance: Meticulously review contract terms related to assignments and changes of control during due diligence. If a contract says it terminates or needs consent upon a merger, you must address that with SAP to avoid losing your rights. If possible, negotiate waivers or new terms before the deal closes.
• No transitional agreement for a carve-out (leaving a spin-off in legal limbo).
  Avoidance: Always have a transition services agreement (TSA) in place for IT and get SAP’s written consent for the spin-off to use the system during that period​. If you can, pre-negotiate a TSA clause in the contract. If not, negotiate a temporary license or amendment at the end of the deal. Don’t let the spin-off keep using your SAP system “informally” without explicit permission—this is a huge audit risk.
• Allowing separated entities to access systems longer than allowed.
  Avoidance: Strictly enforce cutoff dates. If a 6-month TSA is agreed upon, ensure the spin-off is completed by that date or formally request an extension from SAP. It’s easy for a business separation to drag on, but unlicensed usage, even if it’s one month beyond the agreed-upon term, can be penalized. Plan the cutover carefully and have contingencies in case of delays (like requesting an extension well before the original period lapses).
• Overpaying due to poor negotiation (e.g., buying duplicate licenses or missing out on combined discounts).
  Avoidance: Leverage the situation – combined volume, competition, and long-term commitment – to negotiate better pricing. Don’t just accept SAP’s first quote for new licenses. Obtain quotes from a competitor for the cost of the spin-off to benchmark. Also, coordinate purchases to avoid duplication: if you have spare licenses in one company, ask if they can cover some of the other company’s needs via a contract amendment rather than purchasing new licenses. Think creatively and negotiate collectively rather than piecemeal.
• Failing to perform license due diligence in an acquisition.
  Avoidance: If you’re buying a company with SAP, audit their use as if you were an SAP expert. Identify any shortfalls or indirect access issues that may arise. If you skip this, you may inherit a ticking time bomb that explodes at the next SAP audit. Include license warranties in the acquisition agreement, and consider financial holdbacks if you suspect a significant compliance gap. That provides a safety net to cover any subsequent true-up costs.
• No internal alignment – the IT integration team and procurement/licensing team are not synchronized.
  Avoidance: Ensure that those handling system integration are aware of the licensing constraints. Sometimes, IT may start connecting systems or migrating users before contracts are finalized, which can lead to compliance breaches. Make licensing a visible workstream in the M&A integration plan. Similarly, inform business units that until further notice, there are limits (e.g., “Please do not create accounts for acquired employees in System X until we confirm licenses”). Education and clear policies help avoid well-intentioned but risky actions.
• Losing track of what was agreed with SAP.
  Avoidance: Document all agreements. If, down the road, a question arises (“Did SAP allow us to transfer those 50 licenses to Subsidiary Y?”), you should have that in writing to resolve the dispute. You may need to refer back to these terms in one year or five, especially if personnel changes. Good record-keeping prevents “he said, she said” scenarios with SAP.
• Letting maintenance or subscription costs spiral post-M&A.
  Avoidance: After an M&A, if you reduce users or change usage, promptly work to adjust contracts so you’re not paying for idle licenses. If you can’t reduce immediately due to contract terms, mark the next renewal date and be prepared to negotiate a reduction then – don’t just auto-renew at the old levels. Also, watch for support fee increases when contracts merge; push back against the argument that you shouldn’t pay more per unit because of a structural change.

Learning from these common mistakes can help your organization avoid compliance traps and budget overruns. In all cases, the guiding principle is to communicate proactively with SAP, your internal teams, and any third parties involved.

If you address SAP licensing as an integral part of M&A planning (rather than an afterthought), you can turn what is often seen as a headache into a manageable project. Some companies even transform it into an opportunity, for example, rationalizing their software portfolio or negotiating more favorable enterprise terms as part of the deal.

Conclusion

SAP licensing is undoubtedly complex during mergers, acquisitions, and divestitures; however, it can be effectively managed through careful planning and negotiation. Always remember that license agreements are as important as the technology integration in an M&A.

Involve the right experts, thoroughly review your contracts, and engage SAP with a well-prepared strategy. If possible, secure key contractual protections before you need them. If not, approach the situation as a negotiation where you have leverage points (business continuity is a two-way interest).

By conducting thorough due diligence and not shying away from difficult conversations, you can mitigate the compliance risks and avoid the unexpected fees that often accompany M&A events.

In the best cases, companies have used M&A as an opportunity to reset or improve their SAP agreements, emerging with more flexibility or a better cost structure than before.

Above all, be proactive: address licensing on your terms, not just SAP’s. When you take control of the process, you transform SAP from a potential roadblock into a partner in your company’s next chapter.

With solid preparation and the guidance in this article, CIOs and their teams can confidently navigate SAP licensing in any merger or acquisition, ensuring a smooth transition and a compliant, optimized SAP environment for the newly formed business.