SAP buys Qualtrics for $8 billion

SAP
SE CEO Bill McDermott attends the company’s annual results press
conference in Walldorf, Germany, January 24,
2017.
Ralph
Orlowski/Reuters

SAP announced on Sunday that it was acquiring IPO-bound startup
Qualtrics for $8 billion cash.

Qualtrics was on the verge of its IPO, was on in the middle of
its roadshow last week and was scheduled for for its debut next
week. It had expected to raise $424 million to $495 million
in its IPO and at the mid-point of its  $18 to $21 range, it
would have been valued at $4.8 billion.

So SAP is paying quite the premium for Qualtrics.

Story is developing. 

SAP SE to Acquire Qualtrics International Inc., Sees Experience
Management as the Future of Business

Together, SAP and Qualtrics to accelerate the new XM category by
combining experience data and operational data to power the
experience economy

Creates a highly differentiated offering for businesses to
deliver superior customer, employee, product, and brand
experiences

Ryan Smith to continue to lead Qualtrics; Qualtrics to maintain
dual headquarters in Provo, Utah, and Seattle, Wash.

WALLDORF, Germany and PROVO, Utah and SEATTLE, Wash. – Nov. 11,
2018 – SAP SE (NYSE: SAP) and Qualtrics International Inc.
(Qualtrics) today announced they have entered into a definitive
agreement under which SAP SE intends to acquire Qualtrics, the
global pioneer of the experience management (XM) software
category that enables organizations to thrive in today’s
experience economy. Qualtrics’ XM Platform™ collects feedback and
data across the four vital areas of a business – customers,
employees, product and brand – that are essential in a world
where companies succeed or fail based on the experiences they
deliver. Under the terms of the agreement, SAP will acquire all
outstanding shares of Qualtrics for US$8 billion in cash. SAP has
secured financing in the amount of €7 billion to cover purchase
price and acquisition-related costs. The purchase price includes
unvested employee incentive compensation and cash on the balance
sheet at close. Subject to customary closing conditions and
attainment of regulatory clearances, the acquisition is expected
to close in the first half of 2019. The Boards of Directors of
SAP and Qualtrics have approved the transaction. Qualtrics’
shareholders have also approved the transaction.

SAP CEO Bill McDermott said: “We continually seek out
transformational opportunities – today’s announcement is exactly
that. Together, SAP and Qualtrics represent a new paradigm,
similar to marketmaking 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.”

McDermott added: “The combination of Qualtrics and SAP reaffirms
experience management as the groundbreaking new frontier for the
technology industry. SAP and Qualtrics are seizing this
opportunity as like-minded innovators, united in mission,
strategy and culture. We share the belief that every human voice
holds value, every experience matters and that the best-run
businesses can make the world run better. We can’t wait to stand
beside Ryan and his amazing colleagues for the next chapters in
the experience management story. The best for Qualtrics and SAP
is yet to come!”

Ryan Smith, CEO of Qualtrics, said: “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. 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.”

SAP and Qualtrics Will Together Deliver the Transformative
Potential of Experience Data (X-Data) Combined with Operational
Data (O-Data) Experience management (XM) focuses on obtaining and
tapping the value of outside-in customer, employee, product and
brand feedback. Combining Qualtrics’ experience data and insights
with SAP’s unparalleled operational data will enable customers to
better manage supply chains, networks, employees and core
processes. Together, SAP and Qualtrics will deliver a unique
end-to-end experience and operational management system to power
organizations.

SAP Will Accelerate Qualtrics’ Growth and Further Its Mission by
Offering Global Scale, Reach and Resources Leveraging SAP’s more
than 413,000 customers and global salesforce of around 15,000,
Qualtrics will be able to scale rapidly around the world. SAP has
a strong track record of accelerating growth for the innovative
companies it acquires, as exemplified by the rapid success of
SAP’s recent acquisitions.

Qualtrics expects full-year 2018 revenue to exceed US$400 million
and projects a forward growth rate of greater than 40 percent,
not including potential synergies of being part of SAP.

Following the closing of the transaction, Qualtrics is expected
to maintain its leadership, personnel, branding and culture,
operating as an entity within SAP’s Cloud Business Group. Ryan
Smith will continue to lead Qualtrics, and Qualtrics is expected
to continue to maintain dual headquarters in Provo, Utah, and
Seattle, Washington.

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