Microsoft licensing is rarely the headline issue in a divestiture, and almost always the one that lands late, costs the most to fix, and erodes the value of the divested asset. The playbook below is what we run for sellers planning a separation twelve to thirty six months ahead of close. Carve out planning, transition services, license assignment, and the structural protections that determine the value of the divested asset.
Until close, the Microsoft EA or MCA E covers both the retained business and the divested unit. After close, the contracts diverge. The seller often retains the original master agreement and inherits the cost of any unused entitlements that previously belonged to the divested business. The buyer often signs a new agreement at standalone economics, which is materially worse than the consolidated pricing the divested unit benefited from before separation. The playbook is built to compress this transition cost on both sides and to extract value where the Microsoft account team is most willing to concede.
Every user, server, and Azure subscription that belongs to the divested unit needs a definitive line in the carve out inventory. The inventory is the single most important artifact in the playbook because Microsoft's deal desk will only concede on what is documented.
Two financial models in parallel. The retained business at the new smaller footprint. The divested unit at standalone economics. The delta between consolidated and standalone pricing is the cost the deal needs to absorb or recover from the buyer.
The seller approaches the Microsoft account team with a defined ask. Either split the existing contract into two, transfer specific entitlements to a new buyer contract, or hold the divested unit on a transition services agreement for a defined window. The choice depends on buyer profile and timing.
The TSA documents which Microsoft services the seller continues to provide to the divested unit, for how long, and at what cost. Microsoft licensing inside a TSA is one of the most contested elements of post close TSA negotiation. Specificity protects both parties.
Microsoft licenses do not transfer automatically. The assignment instrument has to be drafted, executed, and acknowledged by Microsoft. Without it, the divested unit operates without licenses on day one of independence and exposes itself to audit risk immediately.
Tenant separation is the most operationally demanding element of the divestiture. New tenant provisioning. Data egress. Identity migration. Backup and recovery realignment. The Azure playbook overlaps with the licensing playbook but is sequenced ahead of it.
After close, the retained business carries the original master agreement with a smaller user count and a smaller Azure consumption profile. The next renewal needs to capture the right size economically rather than perpetuating the pre divestiture footprint at full price.
Divestitures attract audit attention. Microsoft compliance teams know that separations create reconciliation errors. The post close audit posture review identifies and closes the reconciliation issues before they become formal findings.
Microsoft's account team is constrained by deal desk rules that reflect Microsoft's view of where divestitures create or destroy revenue. Knowing the rules lets the seller ask for what is achievable and not waste leverage on what is not. The practice runs the negotiation against this posture map rather than against the account team's first response.
Microsoft will generally agree to split an EA at the natural anniversary date with a corresponding adjustment to user counts and Azure commit. The conversation is administrative rather than commercial when sequenced correctly.
Microsoft will offer the divested unit a defined pricing transition that bridges from consolidated to standalone economics over twelve to twenty four months. The bridge is the most valuable concession the seller can secure for the buyer.
Microsoft resists mid term true down but will concede a partial true down at the natural anniversary following close. The right size needs to be quantified, documented, and presented against the post separation consumption baseline.
Microsoft will not credit the seller for entitlements that were paid for but unused during the TSA window. The protection has to be built into the original contract structure or recovered from the buyer through the asset purchase agreement.
The practice has supported divestiture programs across financial services, manufacturing, and pharmaceutical sellers. We run the playbook against the deal in front of you and quantify the value at stake.