SAP Buying Qualtrics For $8 Billion In Cash: Details About The Deal

By Amit Chowdhry ● Updated November 13, 2018

SAP has announced that it is intending to acquire Qualtrics for $8 billion in cash. Qualtrics is a pioneer behind the experience management (XM) software category. Following the acquisition, SAP and Qualtrics plan to accelerate the XM category by combining experience data and operational data.

XM is all about tapping the value of outside-in customers, employees, products and brand feedback. By combining Qualtrics’ experience data and insights with SAP’s unparalleled operational data, customers will be able to better manage employees, supply chains, networks, and core processes. And SAP and Qualtrics will be able to deliver a unique end-to-end experience and operational management system to power organizations.

Qualtrics’ technology platform enables organizations to collect, manage, and act on experience data. And Qualtrics’ XM Platform is a system of action that is used by teams, departments, and organizations to manage the core experiences of business: customer, product, employee, and brand. Over 9,000 enterprises worldwide including 75% of the Fortune 100 and 99 out of the top 100 business schools in the U.S. use Qualtrics to build products and create more loyal customers.

The deal was announced late on Sunday. And Qualtrics was reportedly gearing up to go public soon. In fact, Smith was scheduled to ring the bell on Wall Street this Wednesday.

This is considered one of SAP’s largest acquisitions since it acquired expense management company Concur for $8.3 billion in 2014. As part of the agreement, SAP is going to acquire all outstanding shares of Qualtrics for $8 billion. To cover the acquisition, SAP secured €7 billion in financing to cover the purchase price and acquisition-related costs. This purchase price includes unvested employee incentive compensation and cash on the balance sheet at the close. The acquisition is expected to close in the first half of 2019.

“We continually seek out transformational opportunities – today’s announcement is exactly that. Together, SAP and Qualtrics represent a new paradigm, similar to market-making shifts in personal operating systems, smart devices and social networks,” said SAP CEO Bill McDermott in a statement shortly after the deal was announced. “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.”

Going forward Qualtrics will be able to leverage SAP’s more than 413,000 customers and a salesforce of 15,000 people to scale up. Qualtrics is expecting the full year of 2018 revenue to surpass $400 million and the company is projecting a forward growth rate of more than 40%, which does not include the potential of being fueled by SAP.

After the acquisition closes, Qualtrics is expected to maintain its leadership teams, staff, branding, and culture within an entity of SAP’s Cloud Business Group. Ryan Smith is going to continue leading Qualtrics at its dual headquarters in Provo, Utah and Seattle, Washington. Smith owns about 40% of Qualtrics with his brother and father, according to Reuters.

Smith had told Reuters that the IPO would have valued Qualtrics at least at $6 billion. And he believed that the company would have been worth $20 billion or $30 billion one day. So they were not under pressure to sell.

One of the biggest reasons why they sold is because McDermott met with Smith a few months ago and quickly became friends. McDermott said that one day he showed up to Smith’s home in a suit and dress shoes and the two ended up playing basketball in the yard. “We hit it off right off the bat,” said McDermott via Reuters.

“Our mission is to help organizations deliver the experiences that turn their customers into fanatics, employees into ambassadors, products into obsessions and brands into religions,” added 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.”

Qatalyst Partners and Goodwin Procter LLP advised Qualtrics on the transaction. For SAP, J.P. Morgan acted as financial advisor and Jones Day acted as the legal advisor for the deal.