Qualtrics Co-Founder Ryan Smith Reveals How The $8 Billion SAP Deal Came Together

By Amit Chowdhry ● October 30, 2019
  • This is the story of how Qualtrics co-founder Ryan Smith sold his company to SAP for $8 billion just four days before the scheduled IPO

In November 2018, experience management software company Qualtrics was acquired by SAP for $8 billion. And in a recent interview with Inc.com columnist Minda Zetlin, Qualtrics co-founder and CEO Ryan Smith discussed how the deal came together.

Smith had originally launched Qualtrics in Provo, Utah out of his parent’s basement in 2002. About 16 years later, Smith was preparing to take Qualtrics to go public. However, the company was acquired by SAP four days before the IPO was supposed to happen.

Smith told Inc. that he received an offer for the company in 2012 for “half a billion dollars.” But they turned it down. Prior to that acquisition offer, Qualtrics did not raise venture capital. After receiving the offer, Qualtrics decided to raise a round of funding.

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“I think we wouldn’t have raised a round if we hadn’t had an outside offer, because it really showed the decision we had to make: Are we going to keep running this like a homegrown Utah company, or are we all in to build a multibillion-dollar company? And we just said, let’s go,” said Smith in the Inc. interview.

In November 2018, Smith had a target of going public right before Thanksgiving. But at the beginning of October, the stock market fell and Smith received multiple calls from banks asking whether they were going to keep going on a roadshow for the IPO. At the time, Qualtrics was the only company on the road since other companies decided to postpone their IPOs.

Prior to the roadshow, Smith was talking to former SAP CEO Bill McDermott about a potential partnership — which turned into an acquisition conversation. McDermott told Smith not to go on the roadshow after a deal was scribbled on a napkin.

“I said, ‘No, I can’t not go on the roadshow when all I have is a napkin. But I’ll tell you what–I’ll go Monday through Friday. We’re going to ring the bell at the stock exchange the following Thursday. You’ve got seven days.’ They called me on the Sunday afternoon before the IPO and said, ‘We just had a board meeting and a vote, and we’re going to be able to pull the trigger,” added Smith in the Inc. interview.

Qualtrics’ valuation before the acquisition was $2.5 billion. And for the IPO, Qualtrics was planning to price its shares at $18 to $21. Since Qualtrics was oversubscribed, the price was going to be increased. This would have valued Qualtrics in the $4 billion to $6 billion range. So when SAP paid $8 billion, it was at a bit of a premium. However, it would likely cost SAP more than $8 billion to buy Qualtrics had the company gone public.

Featured photo credit: Ryan Smith