SAP RISE Contract Playbook for Mergers, Acquisitions & Divestitures

SAP RISE Contract Playbook for Mergers, Acquisitions & Divestitures

Mergers, acquisitions, and divestitures (M&A) can upend even the most carefully negotiated SAP contracts.

For organizations using RISE with SAP, SAP’s bundled S/4HANA cloud subscription – these corporate changes introduce complex challenges around licenses, contracts, and costs.

CIOs and sourcing professionals must navigate license transfers, contract restructuring, and SAP’s pricing tactics during M&A events.

Without proactive planning, a merger or spin-off can trigger unexpected fees, compliance risks, or forced re-negotiations at the worst possible time.

This playbook provides an advisory roadmap to handle M&A scenarios within SAP RISE frameworks.

We’ll explore common challenges (like non-transferable licenses and contract “poison pills”), examine change-of-control clauses and their impact, discuss how cloud usage and license metrics adjust post-M&A, and highlight real-world examples from 2021–2025.

Finally, we distill expert and analyst recommendations – from firms like Redress Compliance and Gartner – into actionable steps to future-proof SAP RISE contracts against M&A disruptions.

(Keep in mind: Every SAP contract is unique. )

M&A Challenges Impacting SAP RISE Contracts

M&A activity can profoundly affect an organization’s SAP licensing and costs. Key challenges include:

• License Transfer Restrictions: SAP’s standard policy is that licenses are non-transferable to new entities without SAP’s consent. Each SAP license or cloud subscription is tied to a specific legal entity (the original licensee and its affiliates). In a merger or sale, you cannot simply “hand off” or share SAP licenses with the other party. For example, if Company A acquires Company B, Company B’s SAP licenses do not automatically transfer to Company A, and vice versa. In a divestiture, a spun-off business unit loses the right to use the parent’s SAP software once it’s no longer an affiliate. Without planning, the separated entity must stop using SAP or quickly negotiate a new contract, an often expensive and urgent process.
• Contract Rigidity and Re-Contracting: If rigid, SAP contracts can become “poison pills” in mergers and acquisitions (M&A) deals. A merger might leave the combined company with multiple SAP contracts (each with different terms, metrics, and end dates) that can’t be easily merged. Conversely, a divestiture can strand the parent with excess licenses and sunk costs (since license counts typically cannot be reduced mid-term), while the new company must start from scratch. Contract restructuring is often required – for example, consolidating two maintenance agreements or carving out a new contract for a spin-off – and SAP will often view this as an opportunity to impose new terms or push a fresh RISE deal. All this adds complexity at a time when IT teams are already busy integrating or separating systems.
• SAP’s Pricing and “Revenue Opportunity”: SAP views M&A events as revenue opportunities, not free mergers. SAP may push for license upgrades or additional purchases during the transition. Commonly, an acquiring company needs to buy additional SAP user licenses or subscriptions to cover new employees from the acquisition. If two SAP customers merge, simply combining their license entitlements isn’t allowed without SAP’s involvement. SAP may require buying new licenses or migrating to a new contract (potentially at a different discount). In divestitures, the new standalone entity often faces higher costs: it might lose the parent’s volume discounts and have to negotiate a smaller RISE subscription at higher unit prices. The parent, meanwhile, might continue paying for the original subscription or support even if part of the user base is gone, since most contracts lock in a fixed fee until renewal. Without careful negotiation, organizations can pay dearly: one Deloitte analysis noted that splitting off ~25% of a business could cost well over $18 million in new SAP licensing to make the spin-off legal and compliant.
• License Compliance Risks: During the chaos of a merger, license compliance can slip through the cracks. If an acquired company was out of compliance (e.g., using more users than licensed or misclassified roles), those issues become the buyer’s problem after the deal. There have been cases where a company acquired another and inherited an SAP audit headache – shortly after closing, SAP audits revealed the acquired firm’s SAP use was under-licensed, resulting in an immediate unplanned bill. Similarly, in a carve-out scenario, if the departing unit continues to use the parent’s SAP system without proper arrangements, both parties will violate the contract. (One example: A manufacturer sold a division to a private equity firm. The divested business continued to use the parent’s SAP ECC system post-close, unaware that they had no legal license to use SAP once they left the corporate family. An audit later forced the new company into an emergency purchase of SAP licenses and left the parent in breach of contract for “sharing” its software.) These scenarios underscore that M&A can trigger SAP audits and compliance enforcement, particularly if licensing isn’t squared away upfront.
• Overlapping Systems and Shelfware: The combined entity might have duplicative systems or licenses in mergers where both companies run SAP. For example, after the merger, you may be running two parallel S/4HANA or ECC systems, each with its own set of named users, some of whom may be the same individuals with multiple accounts. Counting actual usage becomes difficult, and inefficiencies arise (e.g., unused licenses on one side, while others need more). Without consolidation, you could be overpaying for maintenance on redundant licenses. On the other hand, consolidating systems immediately is often impractical, so companies may tolerate temporary duplication at a cost. Identifying “shelfware” (unused licenses) and opportunities to retire one system is a challenge amid integration, but addressing it can save millions.
• Integration Timeline and TSAs: In a divestiture, it’s rarely feasible for the new company (SpinCo) to create its own SAP environment on Day 1. The buyer and seller often sign a Transition Services Agreement (TSA) allowing the seller to continue providing IT services (including access to SAP) for a limited time. However, from SAP’s perspective, this can be a violation unless SAP authorizes it. Companies often need to negotiate a Transitional Use License or agreement with SAP to cover this interim period. A SAP Transitional Software Agreement is a time-bound license that permits the new owner to use the seller’s SAP system for a specified period following the close of the transaction. These TSAs are costly (they may involve fees for the privilege of interim access), but without them, the spin-off could not operate on day one. Managing these TSAs adds another layer of cost and negotiation in the M&A process.

In summary, M&A events spotlight SAP contract limitations. Companies face non-transferable licenses, inflexible subscription commitments, and opportunistic pricing from SAP.

Unless you proactively plan for these scenarios, the result can be unbudgeted costs and urgent re-contracting. The next sections delve into how specific contract clauses (like change-of-control terms) and cloud subscription models (like RISE) come into play and how to mitigate these challenges.

Change-of-Control Clauses and Contract Triggers

One critical aspect to examine in your SAP agreements is the assignment or “change-of-control” clause.

This language dictates what happens to the contract if your company undergoes a merger, acquisition, or sale.

Key points to consider:

• Assignment Restrictions: SAP’s standard contracts typically forbid assignment of the agreement or transfer of licenses to a third party without SAP’s prior written consent. In plain terms, if your company (the licensee) is acquired or merges into another entity, or if you divest a business unit, you cannot assign the SAP contract or carve out part of the licenses to the new entity without SAP’s prior agreement. This gives SAP veto power and leverage in mergers and acquisitions (M&A) situations. SAP could insist that the new owner negotiate a new contract without an agreed assignment. This is how an unwanted “reset” occurs: a customer with a favorable legacy contract might be forced onto SAP’s current terms and pricing post-merger, if the contract technically cannot be carried over to the merged entity.
• Change-of-Control as a Contract Reset: Some contracts even include a clause stating that a change in majority ownership of the customer constitutes a material event, allowing SAP to terminate or renegotiate the contract. These are rare, but if present, they are dangerous – essentially a built-in “kill switch” if you get acquired. You want to avoid any clause that lets SAP terminate or alter the deal simply because your corporate structure changed. Otherwise, an acquisition could automatically put you at SAP’s mercy to sign a new contract (often at higher rates or with less favorable terms).
• Negotiating Flexibility: Ideally, you want to pre-negotiate M&A flexibility into your SAP agreements. When signing a new RISE contract or any major license deal, try to include language such as: “Customer may assign this agreement to a surviving entity in a merger or to any purchaser of substantially all its assets, with SAP’s consent not to be unreasonably withheld or delayed.” This clause ensures that the SAP contract can follow the business to the new entity if your company merges or sells a division. While SAP will still require formal consent, the “not unreasonably withheld” standard prevents it from capriciously blocking the transfer. Many vendors agree to clauses like this for large customers, but you must ask for it. The goal is to avoid a scenario where SAP uses a merger as an excuse to void your contract or demand re-signing on worse terms.
• Divestiture Carve-Out Rights: If you anticipate divestitures, negotiate carve-out provisions. For example, some enterprises have obtained terms allowing them to transfer a portion of their licenses to a spin-off. A clause might say, “Customer may transfer up to X% of users or licenses to a single divested entity, with notice to SAP.” Another helpful provision is agreeing on how a separated entity can continue to use SAP for a transition period. You might consider embedding a provision for a divested business to operate under your SAP contract for 6–12 months post-separation (a built-in transition service agreement, or TSA) to give them time to establish their system. Defining these rights in advance saves you from the need for frantic negotiations with SAP during the deal-closing process. (If such a clause exists, it typically will require the spin-off to sign its support agreement with SAP for updates, and it may prohibit transferring licenses to a direct competitor.) The main point is to pre-negotiate some license portability, even if limited, so an M&A event doesn’t immediately remove a portion of your business from its systems.
• Affiliate Usage Definitions: Ensure the contract’s definition of the licensed entity (often termed “Customer” or “Licensee”) is broad enough. Typically, SAP defines a Customer as a majority-owned affiliate, which encompasses internal mergers or reorganizations within your corporate family. Double-check this. If you plan to merge with another company and keep both as affiliates under a new parent, you’ll want both to be covered. In some cases, companies negotiating enterprise agreements include provisions that allow them to create a joint venture or spin-off while retaining a stake, enabling the new entity to continue using the SAP software under the original license. These situations are complex, but it’s worth exploring if, for example, a subsidiary might split off. Yet, you’ll still own 20% of it – can that JV still be considered an “affiliate” authorized to use the software? Pushing the boundaries of affiliate definitions can maintain continuity of SAP use in partial divestitures or internal restructurings.
• Co-termination and Unified Terms: You may inherit multiple SAP contracts with varying end dates and terms following a merger. This complicates things because SAP maintenance and RISE subscriptions often have annual cycles and non-cancelable terms. If you know a merger is coming (or as part of post-merger cleanup), work with SAP to align contract end dates and support renewal dates. Co-terminating the contracts (so they renew on the same date) allows you to negotiate a single consolidated contract later. Also, clarify how fees will adjust if you consolidate or reduce licenses: SAP maintenance fees notoriously don’t decrease, even if you drop users. Try to agree that if license counts decrease due to a divestiture, the support fees can be adjusted proportionally (or at least not increased in unit rate to compensate). In a cloud subscription (RISE), ask for the ability to reduce the user count or services if a segment of the business is sold, without waiting until the end of the term – even if SAP only allows this with notice or at a penalty, it’s worth discussing. The reality is that SAP often resists decreases in the mid-term. Still, savvy customers have sometimes negotiated rights to a reduction at the next anniversary or a one-time discount in specific M&A cases. The key is to avoid paying for software that a separate part of the company is no longer using.

In essence, review your SAP contracts now for M&A-related clauses.

If you find none, consider amending the contract, or be aware that any future corporate change will require SAP’s permission. If you are entering a new RISE contract, consider making M&A flexibility a key point of negotiation. It can differ between a smooth post-merger transition and a costly licensing scramble.

Cloud Usage & License Metrics Under RISE in M&A Scenarios

RISE with SAP introduces a subscription-based model that differs from traditional on-prem licensing, which has specific implications in M&A situations.

Here’s how cloud usage and pricing models may change when companies merge or split under a RISE contract:

• Full User Equivalents (FUEs) and Subscription Scaling: RISE contracts commonly utilize the Full User Equivalent (FUE) model – a pooled metric that weights and sums various types of users (e.g., advanced, core, self-service) to provide a comprehensive view. When two organizations merge, their combined FUE consumption may exceed what either had individually. In a merger, you will likely need to increase the subscribed FUE count (or overall subscription metrics) to cover the new total users and usage. Scaling up a RISE subscription is generally possible, but it will incur a cost – ideally at the pre-negotiated rates outlined in your contract. (Note: Check if your RISE contract has tiered pricing that gives volume discounts as user counts grow. If the merged entity falls into a higher band of users, you might get a better per-user rate on the increment, but this depends on how the contract was structured.) Engaging SAP early about adding users to RISE is important because they will treat it as new SaaS revenue. The addition might be handled via a change order to your contract or as part of an early renewal/extension deal.
• Inability to Scale Down Mid-Term: One downside of RISE subscriptions is their rigidity for reductions. If a divestiture occurs, the parent company may suddenly have far fewer users than the contracted FUE count, but it cannot simply drop those subscriptions and pay less, at least not until the contract term is up. Unless you negotiated a special clause, RISE is typically a fixed commitment for the term (e.g., a 3- or 5-year term with a set annual fee). If 20% of your users leave for a spin-off, you’re likely stuck paying for that unused 20% for the remainder of the term. The new spin-off, meanwhile, will have to sign its own separate SAP agreement to use SAP (they cannot continue under the parent’s RISE deal once they’re independent). That new agreement could be another RISE contract (perhaps a smaller, scaled-down one) or a different SAP offering. Either way, the spin-off’s costs might be higher because it is now a smaller entity negotiating afresh. Action item: At renewal time, adjust your RISE quantities to reflect the new reality, or explore whether SAP can accommodate an early reduction (perhaps by having the spin-off take on that portion in a new contract as part of a negotiation). Some customers attempt to negotiate an M&A clause for cloud deals, for example, “if an affiliated business using the services is divested, the customer may reduce subscriptions by up to Y% with Z months’ notice.” SAP’s willingness to agree varies, but it’s worth discussing if you foresee divestitures.
• Separate Tenants for Separate Entities: Data isolation is a big factor in cloud solutions. After a merger, you may consolidate systems (e.g., move Company B onto Company A’s RISE S/4HANA tenant). Conversely, after a divestiture, the spin-off must split out its data and have its own system. SAP’s policy and good cloud practice dictate that each independent company requires its own cloud instance/tenant for SAP applications after separation. That often means migration projects, such as carving out data from one S/4HANA cloud system into a new one. In the interim, the spin-off’s data may be hosted on the parent’s system under a TSA; however, in the long term, the two companies can’t share a single RISE instance once the separation is final. For mergers, you might run dual environments in parallel for some time (especially if both had RISE or cloud systems) and then decide on one as the go-forward. During that period, each environment’s contract remains in effect. Eventually, the goal might be to consolidate into a single RISE contract and shut down the duplicate; however, this requires coordinating contract end dates or paying exit fees for one of the contracts if it is terminated early. The bottom line is that cloud contracts align with legal entity boundaries; the plan for environment consolidation or separation projects should align with the corporate M&A timeline.
• Merged Organizations and Contract Consolidation: If two companies with RISE with SAP contracts merge, they face a decision: maintain both contracts separately (perhaps one for each legacy landscape) or consolidate them into one. SAP is usually happy to consolidate by signing a new, larger RISE contract that supersedes the two old ones. However, be cautious: SAP may use this to “reset” pricing or terms. The new combined contract might not simply sum the two deals; SAP could propose a higher total if the original contracts had very different discounts or if they bundle in additional services. On the positive side, a merged company might have more bargaining power to negotiate better overall pricing (due to higher volume) or to obtain an Enterprise Agreement that covers all usage under one umbrella fee.
  In some cases, after a merger, customers negotiate an Enterprise License Agreement or a flexible consumption model to simplify compliance across the now larger user base. This can eliminate the hassle of counting every user in each formerly separate system – you pay a big fee for broad usage rights. The trade-off is cost and commitment. It’s wise to evaluate whether keeping two contracts until their natural end and then consolidating them at renewal is more cost-effective than an immediate, big-bang merger of contracts.
• Indirect and Digital Access Considerations: System integrations often increase when businesses are combined. Remember that indirect usage rules still apply even under RISE (which covers direct usage). For example, suppose the acquired company has third-party systems interfacing with SAP. In that case, you must ensure that they are properly licensed (SAP’s Digital Access model may come into play to license document-based indirect use). Similarly, their entitlements may need to be adjusted if the merged entity uses SAP Business Technology Platform (BTP) or other cloud services in conjunction with RISE. All these additional cloud services (SuccessFactors, Ariba, etc.) cannot be split or merged without SAP involvement. Each will have its own contract novation process in M&A. Expect SAP to reassess your entire cloud landscape when you notify them of a merger – they may attempt to co-term and bundle services for “simplicity” (and often a larger spend).
• RISE Contract Flexibility (or Lack Thereof): Gartner analysts have noted that RISE with SAP contracts tend to be rigid. The standard RISE agreement has set service levels and a defined scope that are not easily changed mid-stream. This inflexibility means customers must plan for change in advance. In the context of M&A, it reinforces the need to bake flexibility (such as the clauses discussed above). Also, consider your exit strategy when signing a RISE deal: if there’s a chance your company might split or be acquired during the contract term, think about how you would disentangle your SAP environment. Ensure you have data export provisions and an option to convert to a different SAP offering if needed. For example, if a division might be divested, having the option to convert a portion of your RISE contract into a standalone SAP subscription for that entity (even if that means switching to an SAP S/4HANA private cloud or another product) could be valuable. While no contract will automatically cover every future scenario, raising these “what if” questions during negotiation at least alerts SAP that you expect reasonable accommodation for major business changes.

Key takeaway: Cloud subscription models change the dynamics, but the fundamentals remain – you must involve SAP in any post-M&A license adjustments. Under RISE, be prepared for less flexibility to downsize and the need for formal contract changes to reflect new entity structures.

Proactively manage your RISE user counts and be aware of your contract’s rules for expansion or reduction.

The goal is to avoid paying for cloud services that a merged or separated unit no longer needs, and to seamlessly extend services to any new users who come in.

Real-World Examples (2021–2025)

Many organizations in recent years have navigated SAP contract challenges during M&A. Here are a few illustrative examples and scenarios, drawn from public cases and industry reports:

• Global Food & Beverage Merger – Hidden License Overlap: A global food & beverage company that grew through several acquisitions found its SAP licensing had become a tangled web. After one merger, the combined company ran two parallel SAP ERP systems (one from each predecessor company). Even the same employees had accounts in both systems under different usernames. This made it nearly impossible to accurately count licenses and usage – a classic case of post-merger inefficiency. An SAP audit heightened their awareness of indirect use risks and compliance gaps. The company hired outside experts to review its contracts and usage. They discovered significant shelfware (unused licenses) and inconsistencies. By renegotiating with SAP, the company consolidated its license portfolio and eliminated redundant licenses, resulting in an estimated $29 million in savings over a three-year period. The lesson from this case is that merging SAP environments without a clean licensing integration creates waste and risk. They could optimize and eliminate excess after a thorough post-merger audit. (This example also showed the value of independent licensing advisors who could identify where the company was over-licensed or paying for unused capabilities.)
• Manufacturing Spin-Off – No License to Operate: As mentioned earlier, a large manufacturing firm divested a division to a new owner. The departing division had relied on the parent’s SAP ECC system for its operations. After the deal closed, the division (now a standalone company) continued using the SAP system as if nothing had changed, not realizing the legal implications. Because the spin-off was no longer an affiliate of the parent, it technically had zero rights to use the SAP software under the parent’s license – every transaction they did was unlicensed. Months later, SAP’s auditors discovered this. The result: the new company had to scramble to purchase its own SAP licenses under pressure, and the parent company was cited for breaching license terms by facilitating unlicensed use. Public details are scarce (companies are not eager to broadcast such compliance issues), but industry consultants have noted this scenario is not uncommon. It highlights why both buyer and seller in a divestiture need a clear plan for application access on Day 1. Transitional licensing or clone systems should be set up before the closing, or at least a written agreement with SAP (and likely a fee) to allow continued use of SAP for a short period. Without that, both parties are exposed. This real-world scenario highlights the importance of obtaining SAP’s consent in any license transfer and the costly consequences that can result from overlooking this requirement.
• Fortune 200 Divestiture – Saving $50M via Planning: Deloitte published a case of a Fortune 200 energy company that separated one of its businesses. Initially, the IT and procurement teams treated software licenses as an afterthought, and the default approach would have resulted in tens of millions of dollars in new license purchases and penalties to effect the separation. Once the company realized the stakes, it switched to a centralized re-contracting strategy. By inventorying all software (including SAP) and negotiating with vendors upfront, securing some license transfers, and optimizing contracts, they allegedly avoided about $50 million in costs related to the divestiture. Large enterprises have successfully negotiated limited transfer rights or credits for SAP specifically. For instance, one company negotiated the right to transfer 15% of its users to a divested entity in its SAP enterprise agreement, which later proved invaluable when it spun off a subsidiary. These examples show that, while SAP’s default stance is strict, big customers that plan can carve out exceptions that pay off big when a deal comes.
• Pharma Industry Spin-Offs: The pharmaceutical sector has seen major break-ups and spin-offs (e.g., Merck/Organon, Pfizer’s joint venture spin-offs, Johnson & Johnson’s 2023 consumer health spin-off). Although specific licensing stories aren’t always public, it’s known that these deals involve setting up new SAP environments from scratch. For example, Organon (spun off from Merck in 2021) had to rapidly implement its own SAP S/4HANA system covering 70+ countries as a new independent company. Merck likely provided SAP access via a TSA during the transition while Organon built its system. This mirrors the broader trend: when a business splits off, the new entity often takes the opportunity to deploy a fresh S/4HANA or RISE system (sometimes with a different infrastructure or support partner). SAP often incentivizes this by pitching an RISE deal with SAP to the new entity. However, that new entity might pay more per unit because it doesn’t have the scale of its former parent. We can infer that companies like Organon negotiated short-term rights to use the parent’s SAP and simultaneously signed their own SAP contracts to go live independently as fast as possible.
• Tech Company Acquisitions – Integration via RISE: On the flip side, consider a scenario where a large company on RISE acquires a smaller firm that wasn’t using SAP at all. The acquirer may roll out its SAP (S/4HANA Cloud via RISE) to the new subsidiary to standardize systems. This involves increasing the RISE subscription for additional users and possibly additional modules if the new business has different needs. There have been cases where acquisitions have triggered the parent to migrate to RISE or S/4HANA, as it is often easier to bring everyone onto a new single cloud system rather than integrate into an old ECC system. For instance, if Company A on legacy ECC buys Company B, they might collectively decide to move to RISE as part of the post-merger IT overhaul. SAP’s sales teams often seize on such moments to sell transformational projects. While specific company names aren’t always disclosed, SAP has highlighted customers who, after mergers and acquisitions, chose RISE to harmonize their ERP landscape. These “case studies” typically highlight benefits such as retiring redundant systems and achieving faster value. Still, behind the scenes, there were intense negotiations on contract terms, migration credits for legacy licenses, and the costs of scaling the cloud subscription to the combined entity.

In summary, recent years have seen numerous enterprises wrestle with SAP contracts during M&A. Whether a conglomerate simplifies after a merger or a new spin-off negotiates its first SAP deal, the stories reinforce a common theme:

Those who planned or engaged experts fared far better than those who dealt with SAP on the fly. Next, we turn to actionable recommendations to ensure your organization lands on the “well-prepared” side of that equation.

Proactive Playbook: Handling M&A in SAP RISE Contracts

Organizations should take a proactive, playbook-driven approach to avoid scrambling when a merger or divestiture occurs.

Below is a structured set of recommendations—a “cheat sheet” for CIOs and sourcing professionals to manage SAP licensing through an M&A lifecycle.

Think of it in phases: Pre-M&A Preparation, Execution During the Deal, and Post-M&A Optimization.

1. Pre-M&A Contract Prep and Flexibility

• Embed M&A Clauses in Contracts: Don’t wait for a deal to be announced – bake flexibility into your SAP contracts now. Negotiate key clauses such as assignment rights (for change-of-control), divestiture carve-out rights, and affiliate usage definitions as part of any new SAP agreement or renewal. For a RISE contract, explicitly discuss what happens if your company is acquired or if you need to spin off a business. Pushing for terms like “transfer of subscription with business acquisition” or a built-in transition period for divestitures can save you huge headaches later. Even if SAP won’t grant everything, getting some language in writing is far better than having silence on the issue. Tip: When SAP is eager to close a big deal (e.g., your move to RISE or a S/4HANA migration), you have leverage to insert these protective clauses. Use that moment to future-proof the contract.
• Centralize License Knowledge: Ensure you have a central repository of your SAP entitlements, contracts, and usage. Many organizations struggle during M&A because they lack an accurate understanding of the licenses they own, the scope of each contract, and the extent to which they are in use. Maintain up-to-date records – including any special terms or amendments – so that the moment an M&A transaction is on the horizon, you can quickly assess the impact on your SAP estate. Consider doing internal audits or engaging a SAP licensing specialist periodically to clean up any compliance issues before you’re in an M&A situation. Going into a deal with a clear licensing position (and no lurking compliance gaps) puts you in a stronger negotiating position with both SAP and the other party.
• Anticipate Likely Scenarios: Work with corporate development teams to understand the business’s M&A strategy. If the company is in growth mode (acquisitions likely), or considering divesting a division, tailor your SAP strategy accordingly. For example, suppose you know an under-performing division might be sold in a year. In that case, you might delay a major SAP user expansion or cloud migration for that division to avoid entangling it in a long-term contract. Conversely, if you are acquiring a company, consider how you would integrate their systems – would you consolidate onto your SAP and keep systems separate, or would this acquisition justify moving to a new cloud platform? A high-level integration plan (even if hypothetical) means you can negotiate any enabling contract terms with SAP in advance.
• Engage Advisors Early: Analysts and licensing experts universally recommend getting expert help for M&A. Before a deal closes (even during due diligence if possible), consult with independent SAP licensing advisors or specialized consultancies (like Redress Compliance, SoftwareOne, etc.). They can analyze contract language and identify pitfalls, such as strict anti-assignment clauses or non-standard fees, that may be triggered by M&A. These experts also bring experience from other clients’ deals – they know what concessions SAP has granted in the past and what arguments resonate. Their guidance can be invaluable in shaping your negotiation strategy with SAP. The cost of an advisory engagement is trivial compared to the potential cost of an unfriendly contract clause or a misstep that leads to compliance penalties. As one Gartner report suggested, even for complex programs like RISE, having a third-party navigator helps you get the best outcome and avoid being surprised by fine print.

2. Due Diligence During M&A Planning

• Audit the Target’s SAP Deployment: If you are acquiring or merging with a company that uses SAP, conduct a licensing due diligence review of their SAP environment. Request their license agreements and any recent audit reports. Examine how their contract handles M&A (it might be even more restrictive than yours, or perhaps they have some favorable terms). Crucially, assess their compliance – are they properly licensed for their users and indirect use? This may involve reviewing their user counts, named user types, engines, and other relevant details. If the target has compliance issues, address them in the purchase agreement. Who is responsible for remedying them (usually, the seller must resolve any under-licensing or provide a credit)? From the buyer’s perspective, you want to avoid inheriting a liability for past unlicensed use. If necessary, negotiate an adjustment to the deal price or an escrow to cover potential SAP penalties if any issues are discovered later. On the other hand, if you are selling a business, conduct an internal audit on the business’s SAP usage to ensure it’s clean – the buyer will likely ask. If not, SAP will eventually catch any issues.
• Clarify Post-Deal IT Plans: Determine the intended IT operating model before engaging SAP in discussions. For example, decide: Will the acquired company be integrated into our SAP system (and on what timeline)? Or will it operate separately on its existing systems in the foreseeable future? If you’re divesting, will the spin-off immediately build its IT stack or rely on a TSA for a year? This clarity is important because it dictates what you need from SAP. If the plan is for a single unified SAP system after the merger, your request to SAP might be for a consolidated contract or an enterprise agreement that covers both entities. If you plan to separate systems, you may need short-term cross-use rights. By outlining the desired end state (e.g., “We want one global RISE contract covering Company A and B by next year” or “We need a temporary license for SpinCo for 9 months”), you can approach SAP with a concrete proposal rather than simply reacting to their suggestions.
• Include IT in M&A Deal Terms: Make sure the Sale & Purchase Agreement (SPA) or merger agreement between companies accounts for software licenses. This is often handled via reps and warranties or transitional services sections. For instance, the seller might warrant that it has the right to allow the buyer to use certain IT systems for a period (which ties back to getting SAP’s consent). Or the SPA might stipulate that the buyer will secure necessary licenses by a certain date. Spell out who will pay for any additional licensing costs the deal requires – this can be a significant dollar amount, so it shouldn’t be glossed over. If you’re the seller, you might want the buyer to bear the cost of their new SAP licenses; if you’re the buyer, you might negotiate a price reduction to account for the cost you’ll incur to legitimize the software usage. In short, the SAP issue should surface in the legal deal documents. Both parties should agree on how the cutover of systems will work and who will be responsible for handling what with SAP. This prevents nasty surprises later (“I thought you were going to buy those licenses!”).
• Obtain Transitional Rights in Writing: If a TSA (Transition Service Agreement) is part of the plan (common in carve-outs and some acquisitions), coordinate with SAP to obtain a formal Transitional Use Agreement. This could be structured as an amendment to the seller’s contract or a short-term license for the buyer. The agreement should detail the scope (which users or which system), the duration (e.g., 6 months post-close), and any fees payable to SAP for this privilege. Try negotiating a fixed fee or minimal cost; SAP may charge for a 6-month usage extension, but it’s better than being non-compliant. Also, ensure the agreement covers support – e.g,. The spin-off can get necessary support from SAP during the transition. Don’t rely on verbal assurances; have it in writing that SAP consents to the arrangement. And start this process early – it can take time to get SAP’s approval, so involve them as soon as it’s clear a TSA is needed (often this is during the late stages of deal negotiation or immediately upon signing the deal, well before closing).

3. Negotiating with SAP During the Deal

• Leverage the Situation: During an M&A event, you have some leverage with SAP – if you use it wisely. SAP knows that during mergers or divestitures, customers may consider alternative solutions (a spin-off might evaluate Oracle or a cloud competitor; a merged company might rationalize applications and potentially drop some SAP footprint). Use this as negotiation leverage. Make it clear (politely) that you have options: for example, the divested unit might choose a different ERP if SAP’s offer isn’t reasonable, or the merged company might delay migrating to SAP if costs are too high. Suppose SAP believes it could lose a portion of its business. In that case, they are more likely to grant concessions, such as better pricing for the spin-off’s new contract or allowing a flexible licensing arrangement during integration. Of course, be careful not to bluff too hard, but letting SAP know that the outcome isn’t automatically “all SAP” incentivizes them to be a partner rather than a roadblock.
• Aim for One Face to SAP: If you’re merging two SAP customer companies, decide which entity (or perhaps a new holding company) will be the primary SAP contracting party in the future. It can simplify things by designating a single master agreement and then folding the other into it. When negotiating with SAP, it might be useful to frame it as expanding the scope of one contract rather than a messy merging of equals. SAP might terminate one contract and migrate its licenses into the other contract via an amendment. If you have a preference (maybe one company had a more favorable discount or a longer term locked in), push to use that contract as the survivor. Work with SAP to map out which licenses from Contract B can be absorbed into Contract A, and what that means for support fees. Sometimes SAP will offer a credit or maintenance waiver on redundant licenses if you agree to a bigger S/4HANA or RISE deal – essentially trading in older licenses for cloud subscriptions. Be sure to get credit for any overlap: if post-merger, you don’t need some licenses (because you retire one system), negotiate trade-in credit towards new licenses or subscriptions. Don’t pay 100% twice for two systems you plan to consolidate into one.
• Negotiate Pricing Protections: One risk in M&A is that SAP might use the situation to raise prices – for instance, if a small subsidiary now needs its contract, SAP’s standard pricing for a customer of that size might be worse than what the parent had. Try to negotiate price protection windows. For example, ask that your pre-merger discount level or price list be honored for any additional licenses or users needed due to the merger, at least for a defined period (say 12 months). This way, if you need to buy 500 more S/4HANA users to onboard the acquired company’s staff, you get them at your existing rate instead of potentially a higher “list price”. Conversely, if you’re divesting and know you’ll have excess licenses, see if SAP will allow a buy-back or resale mechanism – they usually won’t buy back. Still, they might allow you to apply the value of those licenses to new cloud services (this is essentially what happens in a RISE conversion: your unused on-prem licenses’ maintenance value can offset RISE subscription costs). The mantra is: lock in as much predictability as possible. If SAP’s stance is that a new deal must be signed for the merged entity, then negotiate that deal as part of the M&A planning, not after the fact when you have less leverage.
• Ensure Continuity of Support: During M&A integrations, system landscapes can be in flux. Make sure that as contracts change, SAP support coverage remains continuous. If you consolidate contracts, there should be no gap in support on any system. If the spin-off is transitioning, arrange how they’ll receive support (they may need their own SAP support agreement once they leave the parent’s umbrella). Often, support fees are prorated when splitting off – negotiate how much the spin-off pays versus the parent in the year of separation. And very importantly, if you divide users between companies, ensure both have legally valid support agreements during the interim. You don’t want a scenario where SAP can’t address an important production issue because the contract status was in limbo due to the split.
• Document Everything: Any special arrangements with SAP during M&A (assignment consents, transitional licenses, merging contracts, etc.) should result in formal paperwork: contract amendments, side letters, or new contracts as needed. Do not rely on email assurances or sales promises. Only the signed contract language will matter when an audit or issue arises. So, push to get all agreements signed by SAP and your company before the deal’s critical dates. For example, if you need an assignment consent effective at merger closing, have that document executed and ready to take effect on Day 1 of the new company.

4. Post-Deal Integration & Optimization

• Execute on IT Integration Plans: After the deal closes, promptly follow through on the planned system changes. If the goal was to migrate the acquired business onto your SAP system, start that project and sunset duplicate systems as soon as feasible. The longer two parallel systems run, the more you pay in maintenance and risk compliance drift. If you promised SAP you’d retire certain licenses after migration (perhaps in exchange for credits), make sure it happens to maintain credibility and avoid unnecessary costs. Set a realistic timeline for these integrations – sometimes it can take a year or more to fully harmonize systems post-merger, which is fine as long as you’ve arranged the licensing to cover that period.
• Monitor Usage and Compliance Continuously: A merger can change usage patterns – suddenly, more users might be using certain SAP modules, or indirect access may spike if systems are interconnected. It’s wise to do a post-merger license baseline check. Use SAP’s measurement tools or a SAM tool to track how your usage compares to entitlements after the dust settles. This will catch any compliance issues early (before SAP’s auditors do). If you find that the acquired folks are using software in ways not covered (e.g., they started using a part of SAP you hadn’t licensed, or their third-party systems are hitting SAP in new ways), address it proactively. Either adjust usage, obtain additional licenses, or renegotiate terms with SAP. You aim to prevent an audit surprise a year or two after the merger. (Note: SAP has the right to audit customers, and big corporate changes are prime times for audits. Some companies even negotiate an “audit grace period” after a merger – it’s rare, but you could ask SAP not to audit until X months post-merger in exchange for transparency now.)
• Optimize Contracts at Renewal: Once you’ve navigated the immediate M&A period, look toward the next renewal or re-pricing opportunity with SAP. This is the time to fully realign your contract to the new business footprint. For example, if you merged and now have one bigger company, consolidate contracts into one unified contract (if not already done) and leverage the larger scale to negotiate better discounts or an enterprise license. If you divested and are now smaller, try to avoid paying for the now-gone portion – negotiate a reduction in scope and cost. Admittedly, reducing fees is tough; if SAP is unwilling to do so mid-term, make it a condition for renewal that the new, smaller size is recognized. You might also consider switching models if it suits the new company: perhaps moving from a RISE subscription to a traditional model (or vice versa) if the M&A changed your IT strategy. Use the renewal as a strategic reset to ensure the contract matches your current state, not the pre-M&A state.
• Learn and Document for Future M&A: Conduct a post-mortem on how the SAP licensing aspect of the M&A was handled. Capture what went well and what was painful. Maybe your team found out late about a contract clause that hurt you – note that and fix it for future deals. Maybe SAP cooperated on one issue but not another – that intelligence can inform how you approach them next time. Update your internal playbook so that these lessons benefit the next acquisition or divestiture. Over time, organizations that regularly do M&A develop a repeatable process for IT contract integration. The goal is to make SAP licensing just another box to check, rather than a fire drill, when corporate development makes a move.
• Stay Agile and Engage Leadership: Finally, keep executive leadership and stakeholders informed about the implications of SAP in the transaction. CIOs should brief CFOs and deal teams on potential costs or risks early, so there’s awareness at the board level. It often takes executive clout to push back on SAP’s demands or to approve the budget for necessary license purchases. By quantifying the impact (e.g. “If we don’t negotiate, this merger could trigger $X in SAP costs”), you can get backing for the proactive measures outlined above. In many public cases, companies that treated IT integration as a high-priority workstream in M&A had smoother outcomes than those that treated it as a secondary task. Licensing is a niche topic, but when millions of dollars are at stake and business continuity is on the line, it deserves a seat at the planning table.

Conclusion

Mergers, acquisitions, and divestitures will never be “easy” in SAP contracts, but they don’t have to derail your IT strategy or budget. The key is approaching SAP licensing in M&A with the same rigor and foresight as any other critical asset. By understanding SAP’s rules (and motivations), negotiating flexible contract terms ahead of time, and executing a clear plan with expert help, you can turn an M&A event from a licensing quagmire into a manageable project.

For SAP RISE customers, remember that a subscription doesn’t magically solve licensing challenges – it shifts them. Your RISE contract is a living document that must adapt to a changing business. If you anticipate change, structure your agreement to accommodate growth or contraction. If a surprise change hits, quickly assess your options and engage SAP (and advisors) with a solution-oriented mindset.

In this playbook, we highlighted common pitfalls like non-transferable and rigid contracts, and solutions like carve-out clauses, transitional agreements, and enterprise licenses. We saw through examples that companies can save tens of millions and avoid downtime by tackling these issues proactively. Let that be motivation to get your SAP house in order before the next corporate shake-up.

In closing, an effective SAP M&A playbook aligns IT reality with business strategy: it ensures that when the business combines or separates, the technology, underpinned by SAP contracts, seamlessly follows.

By following the guidance above, sourcing professionals and CIOs can confidently lead their organizations through M&A from an SAP perspective, safeguarding continuity and optimizing costs. With preparation and the right partners, you can approach your next merger or spin-off without dreading SAP complications, but with a solid plan to rise to the challenge.