BY Richard Summerfield
German enterprise software behemoth SAP is to acquire Qualtrics International Inc for $8bn just as the company was about to go public. The all-cash deal, which is expected to close in the first half of 2019, is part of SAP’s push to enhance its customer-facing business.
Qualtrics, which filed for an IPO in October, recorded a profit of $2.6m on $289.9m in revenue in 2017. The company’s 2017 revenue was up 52 percent on 2016. Qualtrics expects 2018 revenue to exceed $400m. The company’s chief executive Ryan Smith said that the proposed IPO would have valued Qualtrics at more than $6bn. Mr Smith, who co-founded the company in 2002, will continue to serve as its CEO. Following the completion of the deal, Qualtrics will become part of SAP’s Cloud Business Group. SAP, by contrast, reported revenue of more than $26bn in 2017.
SAP will fund the deal through $7.9bn of financing that it secured to cover the purchase price and acquisition-related costs for the deal, which has already been approved by both companies’ boards and Qualtrics’ shareholders.
“We continually seek out transformational opportunities – today’s announcement is exactly that,” said Bill McDermott, CEO of SAP. “Together, SAP and Qualtrics represent a new paradigm, similar to market-making shifts in personal operating systems, smart devices and social networks. SAP already touches 77 percent of the world’s transactions. When you combine our operational data with Qualtrics’ experience data, we will accelerate the XM category with an end-to-end solution with immediate global scale. For Qualtrics, this introduces a dynamic new partner with the belief, passion and scale to bring experience management to millions of customers around the world.”
“Our mission is to help organisations deliver the experiences that turn their customers into fanatics, employees into ambassadors, products into obsessions and brands into religions,” said Mr Smith. “Supported by a global team of over 95,000, SAP will help us scale faster and achieve our mission on a broader stage. This will put the XM Platform everywhere overnight. We could not be more excited to join forces with Bill and the SAP team in this once-in-a-generation opportunity to power the experience economy.”
Qualtrics had planned to raise around $495m in its IPO – around double the company’s most recent valuation. Mr Smith noted that Qualtrics’ IPO was “13 times oversubscribed” due to high investor demand. However, the sale to SAP was deemed more to be more advantageous to the company’s shareholders.
The deal for Qualtrics is the second largest acquisition in SAP’s history. The company’s 2014 purchase of travel and expense software firm Concur was valued at $8.3bn.