SAP announces to buy survey software maker Qualtrics for a whopping $8bn. The German business software group said it would pay cash to acquire all outstanding Qualtrics shares, and had secured €7bn in financing to cover the purchase price and acquisition costs.
The deal is expected to close in the first half of next year, has been approved by both companies’ boards of directors and by Qualtrics shareholders.
The acquisition comes as SAP plans to shift its enterprise software business to the cloud from traditional on-premises services.
Citing on the acquisition, Bill McDermott, SAP chief executive, said, the acquisition would allow SAP to combine its operational data with customer experience data from Qualtrics, enabling clients to incorporate real-time feedback into their strategies. SAP intends to expand Qualtrics’ offerings across its base of more than 413,000 customers. “We’re bringing humans and the human voice . . . into every ounce of the decision making for a business,” Mr McDermott said on a conference call with reporters.
Qualtrics sells market research and survey software, a field known as experience management, to more than 9,000 customers, from Coca-Cola and BMW to the US Air Force and Walt Disney. Its competitors include SurveyMonkey, which went public in September in an initial public offering that valued it at $1.25bn, a steep discount to its last private valuation. The all-cash purchase price offered by SAP is a hefty premium to the $2.5bn Qualtrics was valued at in its last private funding round in April 2017. It is also well above the $4.5bn the company could have reached in its IPO planned for this week, if it had priced its shares at the upper end of the $18-$21 a share range it was seeking, according to filings.
McDermott said on a conference call on Sunday that Qualtrics’ offering, in which it had been looking to raise about $200m, was oversubscribed. Neil Campling, an analyst at Mirabaud, said the deal was the latest in SAP’s effort to buy growth and questioned the multiple paid. “It is an extremely high multiple whichever way you look at it,” he wrote in a note. “Is SAP trying to mask slowing organic growth in the core business? Is SAP trying to bolster a cloud business that is struggling to get significant scale, growth and margin leverage?” Qualtrics had revenue of $289.9m and operating income of $3.1m in 2017.
The company expects revenue to pass $400m this year.