Installing Directory Service on the same machine as License Manager will remove the License Manager (while leaving the LM database). The database can then be migrated to Directory Service as part of its setup.

I would recommend backing up the database for License Manager first.

Laserfiche products licensed against the License Manager will go into their grace periods if they can't contact it to revalidate their licenses (for the newer versions of Laserfiche products, that means they'll keep trying to contact LM periodically for 7 days before considering the license invalid).

Once the database has been migrated from LM to LFDS, your installed Laserfiche applications should continue working as before. From the software standpoint, the License Manager and the Directory Service appear the same to the products calling in to validate their licenses. So for in-place upgrades, you won't have to re-license the installed applications.