Providing software solutions for businesses, SAP decided to purchase Qualtrics, a survey and research software company, which was preparing for an IPO, for 8 billion dollars in cash today. The acquisition is expected to be completed in the first half of 2019.
Qualtrics had reached a valuation of 2.5 million dollars in 2016 with the funding round where they received 180 million dollars. SAP’s acquisition of Qualtrics is the second largest SaaS company acquisition in history. The first place was Oracle’s acquisition of Netsuite for 9.3 billion dollars in 2016.
Bill McDermott, CEO of SAP, said the Qualtrics IPO has received a lot of attention, and the two companies have begun purchasing negotiations a few months ago. SAP’s products are used to measure customer precision and employee loyalty by 9,000 businesses, including survey software, while SAP’s software generates 77 percent of its revenue from commercial transactions around the world.
McDermott says that SAP’s operational data will be combined with Qualtrics’ customer and user data and compares this acquisition to Facebook’s Instagram’s purchase. Apparently; with this acquisition, SAP is preparing to challenge its rivals Oracle, Salesforce.com, Microsoft and IBM.
McDermott, shares financial details, saying that the company has allocated a total of 7 billion euros in cash, taking into account the cost of the purchase and the price of the company. Let’s note that this budget includes employee bonuses and cash that will appear on the balance sheet at the time of purchase.
In the meantime, the co-founder Ryan Smith, who founded Qualtrics in 2002, will continue as CEO. After the acquisition is completed, the company will continue to operate as part of the Cloud Business Group in SAP. Qualtrics will keep its headquarters in Provo, Utah and Seattle, but will continue its brand without dismissal.
We should also note that Qualtrics has received 400 million dollars from investors, including Accel, Sequoia and Insight Ventures. The startup, which intends to sell 20.5 million shares for between 18 and 21 per share, could increase its investment to 495 million dollars. At this point, the value of the company would increase from 3.9 billion to 4.5 billion dollars.
The company, which grew its revenue by 8.5 percent, managed to increase its revenue from 97.1 million dollars in the second quarter and to 105.4 million dollar in the third quarter. At the same time, in the first 9 months of 2018, Qualtrics increased its cash flow to 52.5 million dollars and achieved a cash flow of 36.1 million in the same period of 2017. With the announcement today, Qualtrics expects its total revenue in 2018 to reach 400 million dollars. Moreover, without considering the potential effects of the SAP acquisition, the year-end growth rate is expected to be 40 percent.