Java Licensing in M&A and Divestitures
Corporate deals often forget one detail — software licenses. Oracle Java is one of the easiest to overlook and one of the hardest to fix later. When ownership changes, so do your rights.
Read our comprehensive guide to Oracle Java Licensing Legal & Contractual Insights.
Why Java Licensing Gets Complicated in M&A
Oracle Java licenses are non-transferable by default. If Company A buys Company B, Java code in B may not legally be moved to A.
Likewise, when you spin off a division, the new entity often loses any right to Oracle Java that it had under the parent company. Oracle’s contracts define the “customer” very specifically (the named company and its majority-owned subsidiaries). If the corporate structure changes beyond that definition, the Java rights don’t automatically follow.
In other words, without Oracle’s written consent, both sides of the deal could suddenly find themselves out of compliance.
Oracle’s auditors are well aware of these situations. In fact, they often monitor merger and divestiture announcements, expecting some companies to unknowingly violate these non-transfer rules.
A merger treated as a license-free-for-all is basically an open invitation for Oracle to conduct a compliance audit.
What Oracle Contracts Usually Say
Oracle’s Java SE Subscription Agreement generally includes wording like this:
“Licensee may not assign, transfer, or sublicense this agreement without Oracle’s prior written approval.”
In plain English: you can’t move Java licenses between entities — even within the same corporate group — unless Oracle signs off first. If you try to, Oracle may treat it as unlicensed use and a breach of contract.
Very few, if any, Oracle Java agreements include exceptions for mergers or acquisitions. Unless you’ve negotiated a special clause, assume you must get Oracle’s permission whenever your company’s structure changes.
Pro Tip: “M&A without Oracle consent is like driving without registration — it works until you’re stopped.”
How to manage your Java entitlements, Tracking License Entitlements, and Evidence.
Typical M&A Scenarios and Their Risks
Common M&A scenarios show how Java licensing can slip through the cracks.
Here are a few scenarios, what happens to Java rights, the risk level, and recommended actions:
| Scenario | What Happens | Risk Level | Recommended Action |
|---|---|---|---|
| Full Acquisition | Buyer inherits systems using Oracle Java. | High | Confirm licence transfer approval from Oracle. |
| Partial Asset Sale | Java runs on assets moving to a buyer. | Very High | Negotiate a new subscription for transferred systems. |
| Merger of Equals | Two Java estates are combined. | Medium | Consolidate licences and check overlapping subscriptions. |
| Divestiture | Spun-off company loses parent’s Java licence. | Extreme | New entity must sign a new licence or move to OpenJDK. |
| Internal Reorg | Legal entity changes but same overall company. | Low–Medium | Notify Oracle of entity changes to maintain coverage. |
As shown above, even an internal reorganization isn’t risk-free. A full acquisition carries high risk unless you get Oracle’s blessing on license transfers. And a divestiture is the highest-risk scenario of all.
For example, in a partial asset sale, the seller’s Oracle Java licenses aren’t included. The buyer inherits servers or applications running Java, but none of the seller’s Java entitlements transfer over.
Unless the buyer immediately arranges new licenses, those systems will be running unlicensed Java on Day 1.
That’s why a partial asset sale is a Very High risk. Likewise, in a full divestiture, the spin-off business begins life with zero Oracle Java entitlements—an Extreme risk unless remedied before the separation is final.
Read our agreement guide, Oracle Java SE Subscription Agreement (Annotated Guide).
During Due Diligence – What to Check
Before any deal closes, make sure to surface any Java licensing landmines.
That means involving your IT asset managers, procurement, and legal counsel early – Java licensing spans technical and contract issues.
Key actions:
- ✅ Review all existing Oracle Java contracts and purchase agreements. Know exactly what rights each entity has (or lacks).
- ✅ Identify which legal entities (company names) are actually listed as the licensees in those agreements.
- ✅ Confirm any license transfer or assignment restrictions in each contract.
- ✅ Audit the technology: find out which systems and applications are using Oracle’s Java (as opposed to OpenJDK or other providers).
- ✅ Evaluate options: would it be cheaper to migrate some systems to OpenJDK or another solution rather than paying for new Oracle licenses?
Pro Tip: “Licensing surprises appear after closing — fix them before signing.”
Handling Oracle in an Acquisition
If you’re the buyer acquiring another company, be proactive with Oracle to avoid compliance issues.
A few guidelines to follow:
- Notify Oracle early—but do so through your legal team or procurement, not casually. Let Oracle know (formally and in writing) that you intend to incorporate another entity that uses Oracle Java.
- Request written approval to transfer the Java licenses or extend coverage to the acquired business. Get explicit consent that the acquisition won’t violate your agreements.
- Don’t rush integration. Avoid merging IT environments or rolling out your Java installations to the acquired company’s systems (or vice versa) until Oracle gives the green light. Keep the Java environments separate if needed.
- Document everything. Keep copies of all communications with Oracle about the acquisition and licenses. If an audit comes later, this paper trail is your defense.
- Brace for a sales pitch. Oracle may offer “transition assistance,” which usually means they want to sell you new subscriptions or an expanded Java agreement for the combined company. Treat this as part of the negotiation, not a favor.
Keep in mind: if the acquired company has its own Oracle Java subscription, that contract isn’t automatically yours now.
Oracle may allow the acquired entity’s subscription to run its term, but it will eventually push to consolidate it under your organization or have you sign a new agreement. Plan for that consolidation at renewal time.
Handling a Divestiture
When splitting off a part of the company, assume that the new entity will not inherit any Oracle Java rights by default.
The parent company can’t legally “share” its Oracle Java licenses with a business that is no longer under its corporate umbrella post-separation.
Plan early so the spin-off company has one of the following in place at or before Day 1 as an independent entity:
- Its own Oracle Java subscription (negotiated and signed in its name).
- An alternative Java platform (such as OpenJDK or another vendor’s JDK) is ready to deploy on all needed systems.
It is technically possible for a parent company to assign some of its Oracle Java licenses to the new entity, but Oracle’s explicit approval is required. Such license carve-outs are handled through Oracle sales and are not guaranteed; more often, Oracle insists that the spin-off obtain its own subscription.
Without one of those solutions, the new entity will be running Java unlicensed the moment it’s separate. Don’t assume Oracle will cut you slack just because the divestiture is fresh.
Pro Tip: “You can migrate Java faster than you can negotiate with Oracle — if you start before the lawyers do.”
Post-Deal Integration Risks
Even after the deal is signed and closed, Java licensing issues can emerge during integration.
Common post-deal pitfalls include:
- Double-counting users or systems. If both companies have Oracle Java subscriptions, a merger can accidentally double-count employees or devices, effectively doubling costs. Overlapping subscriptions need to be consolidated carefully to avoid overpaying.
- Legacy Java versions hanging around. You might discover old Java installations (Java 6, 7, 8, etc.) in the acquired environment without clear entitlements. These legacy versions may not be covered under any current license, posing a compliance risk if they remain in use.
- “Invisible” audit clauses. The acquired or divested entity might have had Oracle audit clauses or legal obligations that don’t disappear just because of the deal. It’s easy to lose track of these if the responsible team changes or the contract is assumed void. Oracle could still enforce those clauses if the contract remains in effect or if use continues under a new structure.
To stay safe, perform a thorough post-integration Java license compliance audit within 90 days of closing the deal. This internal audit should verify that all Java installations in the combined environment are accounted for and properly licensed (or removed).
Early detection of any gap means you can address it before Oracle’s auditors come knocking. Oracle’s LMS (License Management Services) is known to initiate audits within months after a big merger or spin-off, expecting to find lapses.
Plug those holes yourself first, and you greatly reduce your audit risk.
Checklist – Java Licensing Due Diligence
Use this checklist to guide your Java-related due diligence in any merger, acquisition, or divestiture:
- ✅ Inventory all entities using Oracle Java (which subsidiaries, departments, or servers are running it).
- ✅ Map licenses to entities – know exactly which legal entity name each Oracle Java license contract is under.
- ✅ Verify transfer rights for each license agreement (most will say none without consent).
- ✅ Communicate with Oracle carefully – involve legal counsel for any notifications to Oracle about the deal.
- ✅ Prepare migration plans for any Java usage that won’t be covered post-deal (so you can switch to OpenJDK or another solution if needed).
If more than one of these items is unchecked, assume the deal carries hidden Java license exposure.
Negotiation Levers During Transition
M&A events can give you some leverage with Oracle—if you use them.
Consider these negotiation tactics during the transition period:
- Bundle the discussion with the deal. Try to include Java license transfer or expansion as part of the overall M&A negotiation. For example, the purchase agreement might stipulate that the seller (or buyer) will obtain Oracle’s consent for license transfers, or that Oracle will provide certain concessions.
- Ask for a grace period. Request a short post-closing grace period from Oracle for continued use of Oracle Java by the new combined entity or the spun-off entity. This could be a written indulgence allowing 60–90 days of use while you sort out new licenses. It prevents an immediate compliance breach on Day 1.
- Negotiate transition pricing. If you must buy new Oracle Java subscriptions for the merged or separated company, negotiate a “transitional” discount or short-term pricing. Oracle might be willing to offer a deal for the first year post-merger to secure your longer-term business.
- Leverage alternatives. Make it clear (tactfully) that you have the option to move to OpenJDK or other Java distributions. Oracle tends to be more flexible or faster in negotiations when they know you have a viable plan B. The possibility of losing your Java footprint can motivate Oracle to come to the table with better terms.
Pro Tip: “Oracle moves fastest when it fears you’ll move away.”
Final Take
Mergers and divestitures change everything — including your right to run Java. Remember that software licenses don’t travel automatically when corporate structures change.
Oracle certainly isn’t inclined to give free passes, either. The only safe approach is to plan for Java licensing impacts in every deal, get everything in writing, and use the transition as an opportunity to optimize costs.
Too many companies learn about Oracle Java the hard way. It’s not uncommon for a merged organization to get a shocking compliance bill because Java was overlooked. The good news is that these surprises are completely avoidable with a bit of foresight.
In practice, you want to turn Java licensing into a simple line item in the deal, instead of a legal landmine that blows up later. Handle it early, and you’ll avoid costly surprises down the road.
Pro Tip: “In M&A, licensing is either a line item — or a landmine.”
Read about our Java Advisory Services
