How to Change Microsoft 365 Copilot License Assignment After Merger

After a company merger, IT administrators often need to reassign Microsoft 365 Copilot licenses from one tenant to another or from one user group to a different one. The default license assignment from the previous organization may no longer match the new company structure or user roles. This article explains the exact steps to change Copilot license assignments using the Microsoft 365 admin center, Microsoft Graph PowerShell, and Azure Active Directory group-based licensing. You will learn how to move licenses between users, remove old assignments, and apply new ones without disrupting active Copilot sessions.

Why Copilot License Assignment Changes After a Merger

When two companies merge, the combined organization typically consolidates into one Microsoft 365 tenant. Users from the acquired company may still hold Copilot licenses from their original tenant, which must be removed before new licenses can be assigned in the parent tenant. The root cause of assignment conflicts is that each tenant has its own license pool with a unique service plan ID for Copilot. If a user already has a Copilot license from the old tenant, the new tenant’s licensing system will reject the assignment until the old one is revoked. Additionally, the merged company may have a different number of total Copilot seats, requiring redistribution among employees based on new roles or departments.

Copilot License SKU and Service Plan ID

Microsoft 365 Copilot is licensed as an add-on to specific base subscriptions such as Microsoft 365 E3, E5, or Business Premium. The product SKU for Copilot is CFQ7TTC0LH3Z (Microsoft 365 Copilot). The service plan ID for Copilot is e4a5c8c2-9b7f-4e3d-8a1c-6f2b3d4e5a6b. During a merger, you must target this exact service plan when removing or assigning licenses via PowerShell or group-based licensing.

Steps to Change Copilot License Assignment After a Merger

Follow these steps in the order listed to ensure a clean transition. Start with the Microsoft 365 admin center for small groups, then use PowerShell for bulk operations.

Method 1: Using the Microsoft 365 Admin Center

1. Open the Microsoft 365 admin center
   Go to admin.microsoft.com and sign in with an account that has Global Administrator or License Administrator role.
2. Navigate to Billing > Licenses
   In the left navigation pane, select Billing then Licenses. You will see a list of all product subscriptions including Microsoft 365 Copilot.
3. Select the Copilot subscription
   Click on Microsoft 365 Copilot from the list. The page shows total licenses, assigned licenses, and unassigned licenses.
4. Assign a license to a user
   Click the Assign licenses tab. Search for the user you want to assign a Copilot license to. Check the box next to the user name, then click Assign. The user will receive the license within a few minutes.
5. Remove a license from a user
   On the same Assign licenses tab, find the user who has an old Copilot license. Click the three dots next to their name, select Unassign license, then confirm. This frees the license for reassignment.

Method 2: Using Azure AD Group-Based Licensing

1. Create a security group in Azure AD
   Go to Azure Active Directory admin center (aad.portal.azure.com). Under Groups, click New group. Select Security as the group type. Give the group a name like “Copilot Licensed Users” and assign an owner.
2. Add users to the group
   Open the newly created group. Under Members, click Add members and select the users who should receive Copilot licenses. You can add users from both the parent and acquired company after they are synced to the same tenant.
3. Assign the Copilot license to the group
   In the group’s page, go to Licenses and click Assignments. Select Microsoft 365 Copilot from the product list. Click Save. Azure AD will automatically apply the Copilot license to all group members.
4. Remove old licenses from group members
   If any group member still has a Copilot license from the old tenant, you must first unassign that license. Use the admin center or PowerShell to remove the old license before the group assignment takes effect.

Method 3: Using Microsoft Graph PowerShell for Bulk Operations

1. Install the Microsoft Graph PowerShell module
   Open PowerShell as an administrator and run: Install-Module Microsoft.Graph -Scope CurrentUser. If you already have the module, update it with Update-Module Microsoft.Graph.
2. Connect to Microsoft Graph
   Run Connect-MgGraph -Scopes "User.ReadWrite.All", "Organization.Read.All". Sign in with a Global Administrator account.
3. Get the Copilot SKU ID
   Run Get-MgSubscribedSku | Select-Object SkuId, SkuPartNumber. Look for M365_COPILOT and note its SkuId.
4. Remove an old Copilot license from a user
   Run the following command, replacing UserId with the user’s UPN and SkuId with the Copilot SKU ID:
   Set-MgUserLicense -UserId "user@oldtenant.com" -RemoveLicenses @("SkuId") -AddLicenses @()
5. Assign a new Copilot license to a user
   Run: Set-MgUserLicense -UserId "user@newtenant.com" -AddLicenses @(@{SkuId = "SkuId"}) -RemoveLicenses @()
6. Bulk assign licenses from a CSV file
   Create a CSV file with a column named UserPrincipalName listing all users. Then run:
   $users = Import-Csv "C:\users.csv"
foreach ($user in $users) { Set-MgUserLicense -UserId $user.UserPrincipalName -AddLicenses @(@{SkuId = "SkuId"}) -RemoveLicenses @() }

Common Issues When Changing Copilot Licenses After a Merger

License assignment fails with “Insufficient licenses in the source tenant”

This error occurs when the user still has a Copilot license assigned in the old tenant. The new tenant cannot assign a license until the old one is removed. Use the Microsoft 365 admin center of the old tenant to unassign the license first. Alternatively, use PowerShell with the RemoveLicenses parameter targeting the old tenant’s SKU.

Copilot license shows as “Grace period” after reassignment

When you move a Copilot license from one user to another, the original user enters a 30-day grace period during which they can still use Copilot. This is by design. To force immediate removal, disable the grace period by running Set-MgUserLicense -UserId "user@domain.com" -RemoveLicenses @("SkuId") -DisableGracePeriod.

Group-based licensing does not apply Copilot to new members

This usually happens when the user already has a conflicting license from the old tenant. Ensure all old Copilot licenses are removed before adding the user to the licensing group. Also verify that the group has the correct SKU assigned under Licenses > Assignments.

Item	Microsoft 365 Admin Center	Azure AD Group-Based Licensing	Microsoft Graph PowerShell
Best for	Fewer than 20 users	Automated assignment for dynamic groups	Bulk operations over 100+ users
Requires admin role	License Administrator or Global Admin	License Administrator or Global Admin	Global Admin
Supports bulk removal of old licenses	No, manual per user	No, must remove old licenses separately	Yes, with RemoveLicenses parameter
Grace period control	No	No	Yes, with DisableGracePeriod
Time to apply license	5-10 minutes	Up to 30 minutes	Instant

After the merger, you can now reassign Copilot licenses using the method that fits your user count and automation needs. For ongoing management, set up Azure AD group-based licensing to automatically assign Copilot to new hires in the merged company. As a next step, review the Copilot usage reports in the admin center to ensure all assigned users are actively using the service. For advanced automation, create a PowerShell script that runs weekly to sync license assignments from your HR system.