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SAP ‘clobbers’ competitors with $8bn Qualtrics takeover

German software giant SAP has agreed an $8bn (£6.2bn/€7.1bn) deal to acquire experience management (XM) software specialist Qualtrics, an agreement it states represents a “new paradigm” for the industry just days before the US company was due to launch an initial public offering (IPO).

The agreement announced yesterday (Sunday) foresees that SAP will acquire all outstanding shares of Qualtrics for $8bn in cash. SAP has secured financing in the amount of €7bn to cover purchase price and acquisition-related costs.

Qualtrics compiles feedback and data on customers, employees, products and brands for 9,000 businesses worldwide. Qualtrics chief executive Ryan Smith owns about 40 per cent of the company with his brother and father, with an IPO of some stock having been set for launch.

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.

Speaking on a conference call, SAP chief executive Bill McDermott said talks between the two companies had begun a few months ago, with Qualtrics’ IPO having been oversubscribed ahead of launch. Discussing the potential impact of the takeover, McDermott compared the deal to Facebook’s acquisition of Instagram.

He said: “The legacy players who carried their nineties technology into the 21st century just got clobbered. We have made existing participants in the market extinct.”

Qualtrics’ XM PlatformTM collects feedback and data across the four key areas of a business – customers, employees, product and brand. In a statement, McDermott added: “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.

“SAP already touches 77 per cent 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. The combination of Qualtrics and SAP reaffirms experience management as the groundbreaking new frontier for the technology industry.”

The two parties said that combining Qualtrics’ experience data and insights with SAP’s operational data will enable customers to better manage supply chains, networks, employees and core processes. Together, SAP and Qualtrics said they will deliver a unique end-to-end experience and operational management system to power organisations.

Ryan Smith said: “Our mission is to help organisations 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.”

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 deal.

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