SAP Mergers and Acquisitions Licensing & Contracts
Why SAP Licensing Becomes a Flashpoint in M&A
Mergers and acquisitions (M&A) often highlight issues related to SAP licensing. In 2025, SAP licensing during mergers remains a complex and high-stakes challenge.
Corporate restructuring can inadvertently put companies at odds with their SAP contracts, and SAP often capitalizes on these moments for revenue growth.
Key reasons why SAP licensing becomes a flashpoint in M&A include:
- Corporate changes trigger license scrutiny: When companies combine, SAP will often review whether the new merged entity’s usage still falls under the existing agreements. New legal entities or a larger user base might exceed what the original contract allowed, drawing SAP’s attention to potential compliance gaps.
- Risk of SAP audits during deals: A merger or acquisition can prompt SAP to initiate a license audit. SAP’s auditors know that during corporate transitions, attention is divided – it’s a prime time to find compliance issues. This creates extra pressure on IT teams at the worst possible moment.
- Entitlement changes with integration: Bringing two organizations together usually means integrating their systems. If both run SAP, you may consolidate environments; if one doesn’t, you might add its users to SAP. Either way, your license entitlements (number of users, modules, or system use rights) can suddenly become insufficient. What was compliant for two separate firms may become non-compliant for one combined entity.
- SAP’s revenue opportunity: From SAP’s perspective, an M&A event is a chance to increase sales. SAP’s account reps often use mergers to “reset” your contract terms or upsell new products (such as pushing a move to S/4HANA or cloud subscriptions). Without careful management, you could face proposals for expensive new licenses or contract changes at a time when you have little choice but to address them.
In short, an M&A can turn SAP licensing into a minefield. CIOs, CFOs, and procurement leaders must be proactive to avoid unwelcome surprises, such as sudden true-up fees or forced contract renegotiations.
Understanding SAP’s Contract Triggers in M&A
To navigate SAP mergers and acquisitions contracts successfully, CIOs must understand which contract clauses and definitions are triggered by a corporate transaction.
The main contractual factors to watch include:
- Change-of-control clauses: Many SAP agreements have an assignment or “change of control” clause that dictates what happens if the customer’s ownership changes. Typically, if your company is acquired or merges with another, SAP’s consent is required to carry the contract forward. Some contracts even state that the agreement terminates upon a change of control. In practice, this means a merger could effectively void your existing SAP contract unless you negotiate otherwise, giving SAP an opening to demand a new agreement (often at updated prices).
- Entity and affiliate definitions: SAP licenses are tied to specific legal entities (the licensed customer) and sometimes extend to that customer’s affiliates. Check how “affiliate” is defined in your contract. If you acquire Company B, you want Company B to qualify as an affiliate under your Company A’s SAP contract so that its users are covered. If the acquired entity isn’t considered an affiliate by the contract’s definition, its use of your SAP software isn’t allowed under your current licenses. You would then need to purchase additional licenses or amend the contract to include the new subsidiary. It’s wise to negotiate broad affiliate coverage in your SAP agreements so that future acquired entities can use the software without immediate extra licensing.
- Indirect access (digital access): Post-merger system integrations can inadvertently trigger indirect access licensing issues. Indirect (or digital) access occurs when non-SAP systems or third-party applications indirectly interact with SAP data (for example, a CRM system creating or reading records in SAP). After an M&A, if you connect the acquired company’s systems with your SAP environment, those systems or their users might be consuming SAP functionality without direct logins, which still requires proper licensing. One company discovered this the hard way: SAP demanded an extra €5M in license fees because the merged entity’s new interfaces and user population were not covered under the original license metrics. To avoid such surprises, assess all integrations and user workflows that will result from the merger and clarify how SAP’s indirect/digital access rules apply.
By reviewing these contract elements early in the M&A process, you’ll know where you stand and can address any problematic terms before the transaction is finalized.
Key Risks in SAP M&A Licensing
Understanding the risk areas helps in planning mitigation strategies.
Here are the key risk categories when dealing with SAP licensing during an M&A:
- Compliance Risk: Expanding your SAP user base or usage post-merger without sufficient licenses can quickly lead to non-compliance, as the combined entity may exceed your current entitlements.
- Cost Escalation Risk: SAP may use the merger as an opportunity to demand new licenses at list price or to revoke discounts, causing your costs to spike if not negotiated carefully.
- Contractual Inflexibility: Rigid contract clauses (like strict non-transfer or entity-specific use provisions) can hinder your ability to consolidate systems and licenses efficiently, forcing you into either maintaining duplicate contracts or buying a new license deal.
- Audit Exposure: M&A events often invite increased scrutiny from SAP’s audit teams. Any pre-existing or newly created license shortfall is likely to be discovered and leveraged by SAP during this transition period.
These risks can vary in impact, but none should be ignored. The table below summarizes the main SAP M&A risk categories with a real-world example, the potential impact, and how to mitigate each:
| Risk Category | Example Scenario | Potential Impact | Mitigation Strategy |
|---|---|---|---|
| Change of Control | Acquisition triggers SAP to review or void the contract | High cost (e.g. multi-million € re-license demand) | Pre-negotiate an M&A neutrality clause so a merger doesn’t reset the contract terms. |
| Entity/User Scope | Newly acquired company not covered under license | Must purchase new licenses at full price for that entity | Ensure broad affiliate coverage in the contract or get SAP’s consent to extend existing licenses to new entities. |
| Indirect Access | Integrated third-party systems now interface with SAP | Surprise license fees for indirect usage (e.g. documents created via non-SAP systems) | Clarify digital access rights with SAP or license the interfaces under SAP’s digital access model in advance. |
| Audit Timing | SAP initiates an audit during the merger transition | Management distraction; potential unplanned fees and project delays | Request a freeze or delay on audits during the integration period, or conduct a self-audit beforehand to preempt issues. |
Negotiation Strategies for CIOs in M&A
Faced with SAP during an M&A, a strategic approach is required.
Here are several negotiation strategies CIOs and procurement teams can use to protect their interests:
- Demand contract continuity: Negotiate an M&A “neutrality” clause so that a merger or acquisition does not automatically trigger contract termination or re-pricing. This ensures your existing terms and discounts carry forward under new ownership, preventing SAP from forcing a costly re-license.
- Audit protections: Request that SAP (in writing, if possible) pause any license audits during the integration period. You want to avoid an audit surprise while your IT team is busy merging systems; even an informal understanding to delay audits can buy you critical time.
- License transfer flexibility: Secure the right to transfer and consolidate licenses between the merging entities. Ensure that you can seamlessly transfer the acquired company’s SAP users and licenses into your contract (or vice versa) without incurring additional fees. Additionally, if you might spin off a division in the future, consider negotiating upfront for the ability to transfer some licenses to that entity.
- Use leverage and benchmarking: Leverage your increased post-merger scale and market knowledge to negotiate more favorable terms with SAP’s initial offers. A larger combined company should get better volume pricing, not worse. Come armed with industry benchmark data and don’t accept SAP’s first quote. Make it clear you expect a fair deal aligned with market standards (and that you have alternatives if SAP isn’t flexible).
Example:
One CIO avoided a €10M re-licensing bill by preparing ahead. When SAP insisted that a post-merger company needed a new contract at list price, the CIO invoked a pre-negotiated continuity clause and presented benchmark data to challenge SAP’s demand. Ultimately, SAP honored the existing licenses for the merged entity, and the €10 million proposal was withdrawn.
By planning and negotiating firmly, you can often turn an M&A situation to your advantage. SAP’s sales team also has revenue targets, and if they see that you are knowledgeable and prepared, they’re more likely to offer a reasonable compromise to retain your business.
Example Scenario — Successful SAP M&A Negotiation
For example, imagine Company A (a global SAP customer) acquires Company B (which also has its own SAP system). Initially, SAP insists that Company A must purchase new licenses at list price to cover all of Company B’s SAP usage – an extremely costly proposition.
The CIO of Company A pushes back and negotiates a better outcome: Company B’s licenses are consolidated into Company A’s existing contract, Company A’s favorable discount rates apply to any necessary license expansion, and the contract is amended to include Company B as an affiliate (with provisions to automatically cover future acquisitions as well).
In the end, SAP agrees. The result is roughly €7M in savings compared to SAP’s initial demand, a unified contract that lowers compliance risk, and a smoother integration of the two companies’ SAP environments.
Related articles
- Indirect Access in SAP M&A: Hidden Licensing Traps
- SAP Change of Control Clauses Explained: Risks in M&A Deals
- Negotiating SAP Contracts During Acquisitions: 5 Proven Tactics
- SAP Affiliate Licensing in M&A: Risks, Definitions, and Negotiation Strategies
CIO M&A Licensing Checklist
- Review SAP contracts for change-of-control clauses. (Know if your SAP agreements have any “assignment” or ownership change provisions that the deal could trigger.)
- Validate affiliate and entity definitions. (Confirm which entities are covered by your licenses and whether a newly acquired company qualifies as an affiliate under your contract.)
- Map combined user populations vs. license entitlements. (Add up users and usage from both companies and compare the total to your current license counts to spot any shortfall.)
- Assess indirect access risks from integration. (Identify planned system interfaces between the companies and determine if they might cause indirect SAP usage that isn’t licensed.)
- Negotiate continuity and affiliate coverage clauses. (Ideally, get SAP to agree that the merger won’t trigger a contract reset and that new entities can be covered as affiliates under your existing agreement.)
- Push for audit restrictions during the transition. (Seek an agreement or at least a clear understanding that SAP will not audit during the critical post-merger integration period.)
5 CIO Recommendations for M&A Success
- Treat SAP licensing as a due diligence priority in mergers and acquisitions (M&A).
- Identify compliance gaps before SAP does.
- Negotiate continuity clauses to avoid relicensing traps.
- Align SAP spend with your integration roadmap, not SAP’s demands.
- Use external benchmarks to counter SAP’s claims of uplift.
FAQ
How does SAP define change of control in M&A?
In the context of SAP, a “change of control” typically refers to a significant change in ownership of the customer company. If your company is acquired or merges (typically if more than 50% of ownership changes), SAP considers that a change of control. Most SAP contracts require you to get SAP’s approval to transfer the agreement in such cases, and some contracts even terminate automatically. In short, an acquisition or merger can trigger a need to renegotiate or get consent from SAP for your licenses to remain valid.
Can SAP force relicensing after an acquisition?
Indirectly, yes. If your SAP contract doesn’t allow license transfers to a new owner, then after an acquisition, SAP can refuse to recognize the acquired company’s usage under the old contract. That means you would have to stay compliant by signing a new agreement or purchasing additional licenses. Essentially, without pre-negotiated protections, SAP can insist on relicensing the combined entity’s SAP usage (or else consider you in violation of the contract).
How do affiliates and subsidiaries affect SAP contracts?
SAP contracts typically specify that the software can be used by the contracting company and its authorized affiliates (commonly defined as companies over 50% owned). If you acquire a new subsidiary that qualifies as an affiliate under that definition, that entity’s users might be allowed to use your SAP system under your existing licenses. However, sometimes only affiliates listed at the time of contracting are covered, or SAP expects notification of new ones. If the contract doesn’t automatically cover the new subsidiary, you’ll need to amend the contract or get additional licenses for that affiliate. The best approach is to have language in your contract that pre-approves usage by any future majority-owned affiliates.
What role does indirect access play in M&A compliance risk?
Indirect access can be a major hidden risk during post-merger integration. When you connect an acquired company’s non-SAP systems to your SAP system (for example, their sales application feeding data into SAP), those systems or the people using them might be indirectly using SAP. SAP’s rules typically require a license for such indirect usage (which is often now counted under “digital access”). So, if, for example, an external system creates an order in SAP, that could be considered usage that requires licensing. After an M&A, new interfaces and data flows can introduce many of these scenarios. CIOs should inventory all integrations between the two companies’ systems and ensure that any indirect use of SAP is accounted for in their licensing (or consider SAP’s digital access license model) to avoid compliance issues later.
How can CIOs prepare SAP contracts before pursuing acquisitions?
Preparation is key. Well before any acquisition, CIOs should review their SAP contracts for M&A-friendly terms (or lack thereof). If possible, negotiate provisions such as change-of-control protection (to prevent the contract from being voided by a merger) and broad affiliate usage rights in advance. It’s also wise to assess your current license compliance regularly and address any shortfalls—this way, you start an acquisition from a position of strength. Additionally, make software licensing a standard part of M&A due diligence: understand the target company’s SAP license situation (compliance, contract terms, any looming audits). By preparing your contracts and having a clear view of both companies’ SAP usage, you’ll be ready to negotiate with SAP from an informed standpoint, rather than scrambling post-deal.
