This is a bit of a trick so I’m sharing the steps I followed. The problem arises from SCVMM 2012 not supporting SQL Express. This follows the official method as far as I can tell… not that this specific scenario is documented officially in step by step detail. If you find issues or have ideas about these steps please comment below the article. Thanks.
Near the last step of the upgrade you are informed that it would be a good idea to follow the article below. I strongly recommend it, especially for the instructions on rebuilding your templates.
‘After System Center 2012 Virtual Machine Manager is installed, additional tasks need to be completed to finish the upgrade to System Center 2012 Virtual Machine Manager. For more information about these tasks, see Upgrading to System Center 2012 Virtual Machine Manager (http://go.microsoft.com/fwlink/?LinkID=214130).’
Very helpfull!! thanks jonjor