CIOs and CTOs must proactively address SAP licensing obligations during mergers, acquisitions, divestitures, and corporate restructuring. SAP contracts require customers to notify SAP of major corporate changes — failing to do so can lead to compliance breaches or costly re-negotiations.
SAP licence agreements include strict clauses about assignment and change of control. Your SAP contract is tied to a specific legal entity — you cannot transfer or assign that agreement without SAP's prior approval. By communicating changes early and formally, technology leaders can stay compliant and even leverage these events to optimise licensing terms. Read Temporary Licence Bridging for SAP Access During M&A Transitions.
SAP licence agreements include strict clauses about assignment and change of control. Your SAP contract is tied to a specific legal entity (the customer). You cannot transfer or assign that agreement to another company without SAP's prior approval.
If your organisation undergoes a merger, acquisition, name change, or reorganisation, you are contractually obligated to notify SAP in writing. SAP uses this requirement to maintain control over who is entitled to use its software.
From SAP's perspective, a new owner or reorganised company might mean the original contract no longer applies unless they formally consent. In many standard SAP contracts, a change in ownership without notification can be considered a breach or grounds for termination of the agreement.
Check your SAP contract's assignment or change-of-control clause — it likely mandates prompt notification and approval from SAP when your company's identity or structure changes. A change in ownership without notification can be considered a breach or grounds for termination. See our SAP Contract Negotiation Service.
Several types of corporate changes trigger the obligation to inform SAP and potentially update your agreements:
If your company merges with or is acquired by another, you must notify SAP. The contract may need to be novated (transferred) to the new owner's name or replaced with a new agreement. Even acquiring another company requires notice, especially if that company uses SAP or will be integrated into your existing SAP usage.
When you sell off or spin out a business unit or subsidiary, notify SAP. The separated entity is usually no longer covered under the original licence. You'll need to discuss how that entity can continue using SAP (e.g., new contract or transition period) and whether your licence pool will be reduced.
If your company changes its legal name, undergoes reorganisation, or transfers assets to a new entity, notify SAP so contracts and support agreements can be updated. This is often handled via a novation letter — straightforward but crucial, as your support and rights are tied to the correct legal name.
SAP contracts often allow usage by affiliates under your control (e.g., >50% ownership). If an affiliate leaves your control (sold or independent), that affiliate's usage is no longer authorised — SAP needs to know. Conversely, if you acquire new affiliates, you may need to formally add them to the agreement or inform SAP that your licensed user base has expanded.
Significant changes in how your company operates — outsourcing a division that uses SAP, or reorganising divisions into new legal subsidiaries — should be reviewed against contract terms. If SAP software will be used by a different legal entity or third party, SAP may require notification or separate licensing.
Any event that changes who your SAP software is licensed to, or dramatically alters your organisation's structure, warrants a conversation with SAP. It's better to over-communicate a change than to have SAP discover it later and claim you violated the contract. See our Managing SAP Licences During Organisational Change guide.
Notifying SAP of company changes isn't just a formality — it has real licensing and cost implications. When you inform SAP about a merger, acquisition, or other change, several things typically happen:
SAP will review your current licence agreement to identify necessary changes. Often, a contract amendment or novation will be proposed to reflect the new corporate structure. If your company name or ownership changed, SAP may draft an agreement transferring all rights to the new entity — required to maintain active support under the correct name.
SAP will ask for details on current usage and any new usage resulting from the change. If you acquired a company, SAP wants to know about new SAP users or systems. They'll evaluate if additional licences are needed. If two SAP companies merge, the combined user count might exceed what each had separately — SAP will expect a true-up for additional users or products.
SAP may use this opportunity to reprice or revisit existing discounts. A contract negotiated for a smaller company may not carry over to a larger merged entity. SAP could insist on aligning to current pricing. However, a larger combined company also has more leverage to negotiate better volume discounts — it often results in a fresh negotiation.
Support and maintenance fees (~22% of licence cost per year) may be recalculated if licence volume changes. After a divestiture, proactively seek a reduction in maintenance for dropped licences. SAP won't automatically lower costs — you must request contract adjustments to avoid overpaying for shelfware.
SAP may establish a timeline to resolve the licensing issue. In some cases, SAP allows an acquired company's systems to run under the old contract for a short period (3–6 months) while a new agreement is finalised. For divestitures, you might negotiate a Transitional Service Agreement (TSA) allowing the spun-off entity to use your SAP system for X months post-separation.
A mid-size manufacturer acquired by a larger firm engaged SAP immediately. SAP agreed to novate the software licence to the new parent, but only after the new owner signed a contract addendum. The new contract updated pricing and required additional user licences for the expanded workforce. Because the CIO had notified SAP early and provided usage growth details, they negotiated a 30% volume discount on new licences. Had they delayed, SAP might have treated the new owner's use as unlicensed, potentially halting support or demanding full list price. Early communication turned a potentially costly compliance issue into a manageable negotiation.
Handling communications with SAP requires a professional and methodical approach:
Before reaching out, review your SAP agreements internally to identify clauses related to notification, assignment, or change of control. Involve your legal team or a licensing specialist to understand obligations and rights. Know what the contract says you must do and what SAP can do in response (some contracts give SAP termination rights upon change of control if not approved).
As soon as a corporate change is confirmed (and confidentiality allows), notify SAP in writing. Inform your SAP account manager first, then follow up with a formal letter. Early notification shows good faith and gives both sides time to plan licence adjustments. Ideally, seek SAP's consent before the change takes effect.
Draft a formal notification referencing your contract number and describing the change: what is changing, the effective date, and how you propose to handle SAP licences going forward. If it's a merger, explicitly request contract transfer. If an acquisition, explain whether the acquired entity used SAP and integration plans. Clear documentation prompts SAP's contract team into action.
Don't just send a notice and go silent. Schedule a meeting with your SAP account executive and contract department. Ask what information SAP needs and how they want to proceed. This collaborative tone can make SAP more flexible — they might grant a short-term waiver while paperwork is sorted.
Treat this as a negotiation opportunity, not just a compliance task. Analyse current licence utilisation and future needs. Determine what additional licences you truly need (the acquired company may have overlaps you can eliminate). Emphasise leverage points: "With our larger user base, we expect better discount tiers." See our SAP Contract Negotiation Playbook.
Maintain a paper trail of all communications. Save emails and letters. Ensure approvals or agreed terms are confirmed in writing. Eventually, get formal documentation from SAP (amended contract, novation agreement, or email confirming the change and licence validity). This protects you against personnel changes or disputes later.
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SAP Contract Negotiation →What if you don't notify SAP of a company change? You're playing with fire. Here are the significant risks:
Failing to notify SAP constitutes a breach of the licence agreement. SAP has the right to terminate the contract — losing SAP licences and support overnight is a nightmare scenario for any CIO.
Major organisational changes commonly trigger SAP licence audits. If SAP discovers a merger after the fact, usage by an unauthorised entity will be flagged as unlicensed use — resulting in hefty penalties or forced purchase at list price. 200 unlicensed users can easily run into millions at 100% list cost plus back maintenance.
SAP's support agreements are tied to the licensed customer. Becoming a different legal entity without telling SAP risks suspended support services — during a critical system issue, support could be delayed because the customer name doesn't match post-reorganisation.
Without proactive engagement, you miss the chance to renegotiate or optimise. You could end up overpaying — continuing maintenance for users no longer needed, or missing out on bulk discounts for a larger combined entity.
If you skip notification and it comes to light later, SAP may take a harder line in future negotiations. Being tagged as a company that tries to "fly under the radar" destroys goodwill invaluable for when you need flexibility from SAP.
Not disclosing changes to SAP is far worse than addressing them upfront. The risks range from legal and financial pain to operational disruptions. All are avoidable with planning and open communication. See our SAP Licence Audit Defence Service.
Identify clauses about mergers, acquisitions, or assignments. Know your obligations before a corporate change is on the table.
As soon as a significant change is likely, loop in your SAP account manager under NDA. Early discussions set a cooperative tone and prevent last-minute crises.
Always notify SAP in writing of any qualifying company change. Reference contract details and clearly state what is changing and when. This creates a legal record of compliance.
If divesting a business or merging systems, negotiate transition periods (6–12 months) and temporary licences. Get these terms in writing from SAP. See our Temporary Licence Bridging Guide.
Don't assume old licence counts fit the new company. After a merger or spin-off, adjust SAP licence counts to avoid paying for unused licences or to purchase new ones needed. Renegotiate support fees if your user count changes significantly.
Use company growth (through M&A) to negotiate better pricing or an updated enterprise agreement. A larger organisation often qualifies for higher discount tiers — ask SAP to recalculate pricing based on your new size.
Ensure any contract amendments, novation documents, or new licence orders are finalised promptly. Verify SAP's systems (support portal, invoicing) reflect the correct new entity name and terms.
Ensure M&A teams, legal department, and IT managers know that SAP must be kept informed. Establish an internal checklist so "Notify SAP" is standard whenever a corporate change involving IT systems occurs.
For large or complicated mergers, engage an SAP licensing expert. They can uncover hidden compliance issues in acquired SAP environments and negotiate the best terms for the new structure. Learn about our SAP Advisory Services →
Be honest and cooperative. A positive working relationship can smooth out the inevitable bumps in adjusting contracts and may earn flexibility when you need it.
Our independent SAP licensing experts help enterprises navigate change-of-control obligations, negotiate optimal contract terms, and ensure compliance throughout M&A transitions.