Combining and Carving Out Oracle Licenses Post-M&A and Divestiture
Executive Summary:
After a merger or acquisition, enterprise CIOs and IT Asset Management teams must integrate two Oracle licensing environments into one.
This guide explains how to avoid paying twice for the same Oracle software by consolidating contracts and leveraging the combined volume for cost advantages.
It covers strategies for negotiating better terms with Oracle and ensuring the merged organization is compliant.
Read Combining and Carving Out Oracle Licenses Post-M&A and Divestiture.
Separate vs. Consolidate Oracle Contracts
When two companies merge, they often inherit multiple Oracle license agreements. Initially, it may be simplest to keep contracts separate – each former entity continues using Oracle software under its original contract to avoid any legal gaps.
However, running multiple Oracle contracts in the long term can become cumbersome and inefficient.
Many enterprises eventually choose to consolidate their Oracle agreements under a single umbrella. Consolidating into a single Oracle Master Agreement means having a single set of terms, a single support bill, and a unified licensing scope for the entire new company. This simplifies administration.
The trade-off: Oracle may use consolidation to reset pricing or strip away legacy discounts. Oracle might raise the acquired company’s formerly discounted support fees. Analyze the impact of combining support and negotiation to preserve any favorable terms from the old contracts.
Regardless of the approach you take, remember that Oracle requires formal contract updates when companies merge.
The acquired entity’s users aren’t legally allowed to use the parent’s Oracle licenses until Oracle approves and the contract’s customer definition is amended to include the new subsidiary.
Coordinate with Oracle (and your legal team) to update agreements so all parts of the merged organization are properly covered under the licenses.
Read Carving Out Oracle Licenses in Divestitures.
Unified License Scope and Customer Definition
Merging businesses doesn’t automatically merge their Oracle usage rights. Oracle contracts strictly define the “customer” – typically the company and its majority-owned subsidiaries.
After a merger, you must formally update Oracle agreements to include the new entity. Ensure the consolidated contract’s Customer Definition clause names all major subsidiaries or uses a broad definition (e.g,. “XYZ Corp and its affiliates worldwide”).
This legal step is crucial so that every part of the merged organization is entitled to use Oracle software.
Strive for a future-proof definition that won’t need constant updates. Also, review any geographic or business-unit restrictions in the old contracts. If one agreement limited usage to certain regions or divisions, negotiate a unified global usage right in the new contract.
The goal is to enable the combined enterprise to utilize its Oracle licenses seamlessly across all locations and departments without violating any contractual scope.
Leveraging Volume: Pooled Licenses and Better Deals
A key benefit of post-merger integration is greater volume. The new company now owns a larger pool of Oracle licenses and support spend that can be leveraged for efficiency. Confirm with Oracle that you can pool license entitlements from both sides into one combined allotment.
If Company A had 50 Oracle Database licenses and Company B had 30, the merged entity should have 80 licenses available enterprise-wide. Ensure no contractual restrictions (like hardware-specific licensing) prevent using all licenses across the organization, and have Oracle update your entitlements to reflect the total.
Your larger scale can also strengthen your negotiating position. Oracle may now offer enterprise agreements or volume discounts, given that you represent a larger customer, so seize this opportunity to negotiate better pricing and conditions.
Be cautious, though: Oracle might still attempt to standardize fees upward during consolidation. Come prepared with data on combined usage to push for meaningful discounts, support fee caps, or other concessions while you have increased leverage.
Eliminating Duplicate Licenses and Redundancies
Mergers often reveal overlapping Oracle products or excess license capacity.
Both companies may have licensed the same software or maintained support on similar tools. Following the merger, it is essential to identify and eliminate redundant licenses to reduce costs.
Inventory all Oracle products from both portfolios to spot duplicates. If both sides have licenses for a particular database, application, or middleware, determine if the merged company needs them all.
Often, you can retire one set and consolidate onto a single system. Use this to your advantage by dropping unnecessary licenses from support.
Oracle won’t refund sunk license fees, but you can stop paying maintenance on software you no longer use (within contract allowances).
Oracle typically requires all licenses of a product to remain on support unless an exception is approved. As part of consolidation, you might persuade Oracle to let you terminate or trade in redundant licenses, especially if you’re also buying new products.
For example, you could negotiate credit for turning in unused licenses and apply it toward new Oracle purchases.
Aligning Contract Terms and Maintaining Value
To streamline management, aim to align key terms across the combined organization. First, synchronize support renewals.
If one company’s Oracle support renews in March and the other’s in September, Oracle can prorate and align them to a single renewal date. This makes future budgeting and renewal management simpler.
Next, standardize how you measure usage. Two merging organizations may count the same Oracle product differently (one by processors, the other by users).
Select a single licensing metric for the future and have Oracle adjust the licenses accordingly. A consistent metric makes compliance tracking easier and avoids confusion.
Finally, preserve any special contractual benefits from the legacy agreements. Each company’s Oracle contract may have had unique concessions – for example, more permissive virtualization rights or a cap on support fee increases.
Don’t lose these in the rush to consolidate. Identify any critical legacy entitlements (like significant discounts or usage rights) and negotiate to carry them into the new contract.
Retaining such terms protects the organization from unexpected costs or new restrictions under Oracle’s standard terms.
Recommendations
- Conduct a License Inventory Early: Right after a merger, inventory all Oracle licenses and contracts from both companies. Identify overlapping products, differing metrics, and key contract terms.
- Notify Oracle & Update Contracts: Inform Oracle of the merger and formally add the new entity to your agreements. Obtain Oracle’s written approval to ensure all entities remain compliant.
- Decide on Contract Strategy: Determine whether to run separate Oracle agreements for a transition period or consolidate them into a single agreement. If consolidating, negotiate to carry over any favorable pricing or terms from the old contracts.
- Leverage Buying Power: Utilize the combined spend to negotiate more favorable deals. Seek volume discounts or an enterprise agreement, and push for concessions like fixed support fees or extra license grants.
- Cut Duplicative Spend: Identify duplicate licenses or systems and plan to retire one set. Drop redundant licenses from support to avoid paying double maintenance for the same software.
- Align Renewals & Metrics: Co-term support renewal dates and standardize licensing metrics to simplify management across the new enterprise.
- Retain Special Terms: Preserve any advantageous legacy contract clauses or discounts in the new agreement. Ensure Oracle doesn’t strip away those special terms during consolidation.
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