Riding Mega-Acquisition Wave, Qualtrics Skips IPO for $8B Sale to SAP

Xconomy Seattle — 

It’s hard to say no to $8 billion. Qualtrics, the enterprise software firm that was on the verge of going public, has pulled its IPO in favor of selling to German software giant SAP for $8 billion in cash.

Qualtrics—which has dual headquarters in Provo, Utah (where it was founded in 2002), and Seattle—sells software for collecting and managing user experience data, such as surveying customers and measuring employee engagement. Its competitors include San Mateo, CA-based SurveyMonkey (NASDAQ: SVMK), which went public in September.

SAP (NYSE: SAP) makes a variety of software products, including tools for enterprise resource planning, supply chain management, human resources, and managing connected devices. In an interview with Forbes, SAP chief executive Bill McDermott (pictured above) suggested the Qualtrics acquisition could help his company grow its customer relationship management software business and compete better with Salesforce (NYSE: CRM).

Qualtrics had raised at least $400 million from investors, including Accel, Insight Venture Partners, and Sequoia Capital. The company said that its last round, a $180 million investment announced in April 2017, valued Qualtrics at $2.5 billion. CEO and co-founder Ryan Smith told Forbes he was eyeing a valuation above $5 billion after the IPO.

After more than two years of weak tech IPO activity, going public has become a resurgent option for software firms. Qualtrics was set to continue that trend, but instead it followed another one: the mega-acquisition. This year’s other multibillion-dollar tech deals include Microsoft’s $7.5 billion acquisition of GitHub, Salesforce’s $6.5 billion purchase of MuleSoft, the $5.2 billion merger of Cloudera and Hortonworks, and IBM’s $34 billion acquisition of Red Hat—the biggest software acquisition of all time.

SAP isn’t afraid to pull the trigger on deals of this size. In 2014, it bought Concur Technologies, a Bellevue, WA-based maker of software for managing corporate travel and expenses, for about $8.3 billion.

SAP said it plans to keep Qualtrics’s dual headquarters in Utah and Washington, so the acquisition will further expand the German company’s presence in the Seattle area. Qualtrics will join SAP’s cloud business group, but it’s expected to maintain its brand and staff, including the management team, according to the press release announcing the deal.

The deal is expected to close in the first half of 2019. SAP projects Qualtrics will generate more than $400 million in revenue this year. The company had sales of nearly $290 million last year, up about 52 percent from $190.6 million in 2016 revenue. Qualtrics posted a $2.5 million profit in 2017, according to its IPO filing.