SAP licenses cannot be freely split or transferred in a spin-off. This guide covers non-transferability rules, new contract vs. license transfer options, TSA bridging strategies, protective contract clauses, and cost mitigation — ensuring the spun-off entity is compliant on Day 1.
Divesting a business unit that runs SAP requires careful planning to avoid software licensing pitfalls. SAP contracts do not automatically allow splitting or transferring licenses to a spun-off entity. CIOs and CTOs must proactively ensure the new company (SpinCo) stays properly licensed through transitional agreements, upfront contract clauses, and early engagement with SAP — keeping the spin-off compliant on Day 1 while minimizing extra costs and disruption.
SAP software licenses cannot be freely transferred to another company without SAP's approval. They are tied to the original licensee (and its majority-owned affiliates), so if a business unit is spun off as a separate company (SpinCo), it has no legal right to continue using the parent's SAP software unless SAP agrees.
Perpetual SAP licenses (e.g., for ECC or S/4HANA) are tied to the original customer and its named affiliates. They cannot be assigned or sold to another entity unless SAP agrees in writing. Once SpinCo is no longer majority-owned by ParentCo, it no longer falls under ParentCo's license umbrella.
SAP cloud products (SuccessFactors, Ariba, etc.) are similarly restricted. Cloud contracts are tailored to the subscribing entity. There is no concept of "partially" transferring a cloud tenant or user set to a new company. SpinCo will need its own subscription agreement — or a contract novation approved by SAP — to use those cloud services independently.
Without planning, a divested unit can suddenly find itself unlicensed despite "inheriting" an SAP system from the parent. SAP's strict contract language requires explicit agreement on any transfer of usage rights. Failing to involve SAP can put both ParentCo and SpinCo at risk of breaching their contracts — with potential audit exposure and back-payments at list price.
When licensing a spun-off entity, there are two main approaches. The table below compares them:
| Approach | Description | Pros | Cons |
|---|---|---|---|
| New Contract for SpinCo | SpinCo becomes a brand-new SAP customer with its own contract. ParentCo keeps its licenses. | Clean break; full control for SpinCo. No dependency on parent. Can right-size licenses for the new business. | Higher license costs (no parent discount). Requires SAP data migration. ParentCo left with unused licenses unless negotiated. |
| Transfer Some Licenses | ParentCo splits off some licenses to SpinCo with SAP's written approval. | Minimal disruption for users. SpinCo keeps legacy pricing. ParentCo sheds licenses it no longer needs. | Needs SAP approval (not standard). Potential transfer fees or contract changes. Parent may lose volume discount benefits. |
Often, a short-term Transitional Service Agreement (TSA) covers immediate needs while SpinCo arranges its own SAP contract. Direct license transfers to a spin-off are uncommon unless that right was pre-negotiated in your SAP agreement. Most divestitures end up as "new contract" scenarios.
Splitting an SAP estate often raises licensing costs. There are several pricing dynamics to plan for:
When a single enterprise becomes two entities, each may fall below the volume thresholds that secured the original discount. SAP may reprice the remaining licenses at a less favorable rate — and SpinCo, as a new customer, may face near-list pricing without negotiation leverage.
Both parent and spin-off may be paying support on the same users during the TSA transition period. Align maintenance renewal dates to avoid double payments and negotiate with SAP on interim billing arrangements.
After the divestiture, ParentCo may be paying maintenance on licenses the divested unit used to consume. Ask SAP if unused licenses can be terminated or credited — this is not guaranteed, but worth negotiating.
Plan ahead and negotiate with SAP early. Align renewal dates to avoid double payments. Bundle SpinCo's license needs into the parent's next SAP deal to leverage existing discounts. Budget for the worst case (SpinCo buying at full price) so you are financially prepared even if negotiations stall.
The best time to address divestiture licensing issues is before they happen — by baking flexibility into your SAP contract. If you foresee a future sale or spin-off, consider negotiating these provisions:
Include a clause allowing a portion of licenses to be transferred to a new owner in the event of a divestiture. Even a one-time carve-out of certain users or systems can save SpinCo from an immediate repurchase and save the parent from paying maintenance on unused licenses.
Ensure the contract explicitly allows a divested unit to use SAP under the parent's license for a short period after separation (under a TSA). For example: "continued use for up to 12 months for a former affiliate under a TSA." This removes any doubt about legality during the transition.
Negotiate that a divestiture will not automatically worsen your discount or raise support fees. If your user count drops, maintenance percentages should not jump. Also, seek an agreement that SpinCo can purchase new licenses at the same discount level as the parent, at least for an initial order.
With these clauses in place, a divestiture becomes much easier to manage. You will not be scrambling to get SAP's permission at the last minute — the rules of the split are already laid out in your contract. This is especially valuable for enterprises that frequently acquire and divest business units.
Involve SAP as soon as a spin-off is likely. Use that time to negotiate favorable terms — assignment rights, TSA usage permissions, and price protections — before the deal is finalized. Early engagement gives you more leverage than last-minute scrambling.
If SpinCo needs to continue running on the parent's SAP system post-separation, formalize a Transitional Service Agreement with SAP's explicit consent. Typical TSAs cover 6–12 months. Ensure SAP is aware and the arrangement is contractually legitimate.
Begin the technical separation of SpinCo's SAP data and system well before Day 1. Setting up SpinCo's own SAP instance — whether a fresh install or migrated copy — takes significant lead time. Do not wait until the transaction closes.
After divestiture, eliminate or reallocate any licenses the parent no longer needs and work with SAP to reduce those costs. SpinCo should license only what it needs — avoid carrying over the parent's entire license footprint when a smaller set suffices.
Always budget for SpinCo buying new licenses at full price. This ensures you are financially prepared even if negotiations with SAP do not yield a transfer or discount. Any savings negotiated become upside rather than a dependency.
Include SpinCo's license needs in the parent's next SAP deal so that SAP extends similar discounts to both entities. If SpinCo is open to adopting S/4HANA Cloud, mention it — SAP may offer special pricing to support that migration.
Complex divestitures benefit from independent expert guidance. An advisor who understands SAP's contract mechanics can identify hidden risks, negotiate protective clauses, and ensure both entities end up properly licensed at fair prices.
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