Enterprise software giant SAP SE has agreed to buy Qualtrics International Inc. for $8 billion in cash, pre-empting the U.S. enterprise software company ’s plans to go public.
The all-cash deal has been approved by the boards of both companies and by Qualtrics shareholders, SAP said in a statement on Sunday.
Qualtrics competes with SurveyMonkey, which went public in September. Qualtrics is bigger and growing faster than SurveyMonkey and is also more profitable.
Germany’s SAP, led by Chief Executive Officer Bill McDermott, has secured financing of 7 billion euros ($7.9 billion) to cover the purchase price and acquisition-related costs. This is SAP’s largest deal to date, according to data we compiled, topping its 2014 acquisition of Concur Technologies Inc. for $7.2 billion.
The deal is SAP’s second-biggest acquisition ever, following the $8.3 billion purchase of travel and expense software company Concur in 2014. To build its cloud business, SAP acquired SuccessFactors in 2011 for $3.4 billion, and earlier this year purchased Callidus for sales performance management at a price of $2.4 billion.
Qualtrics is the latest software company to get acquired just before its planned IPO. Cisco bought AppDynamics in 2017 right before its debut, and Workday bought Adaptive Insights earlier this year prior to an IPO.
It also marks another blockbuster software deal and comes just two weeks after IBM announced plans to buy Red Hat for $34 billion, the industry’s biggest ever acquisition. Earlier this year, Microsoft bought GitHub for $7.5 billion and Salesforce paid $6.5 billion for MuleSoft.
“Tuck-ins are tuck-ins but transformative deals are transformative deals,” McDermott said in a conference call. “You’d have to do a whole lot of tuck-ins and spend a whole lot of years tucking-things-in to do what we did here.”
Qualtrics, which makes software for surveying customers and analyzing employee sentiment, sees 2018 revenue exceeding $400 million and forecasts a forward growth rate of greater than 40 percent. The company earlier filed for an IPO of $200 million. It was valued at $2.5 billion in a 2017 private funding round and its customers include Microsoft Corp., JetBlue Airways Corp. and General Electric Co.
SAP anticipates that the transaction will close in the first half of 2019, and Qualtrics will operate as an entity within SAP’s cloud business group. Ryan Smith, Qualtrics’s CEO, will continue to lead the company, which will maintain dual headquarters in Provo, Utah, and Seattle.
“We want to be working with SAP and that’s what were most excited about,” Smith said in the call.
Qualtrics was advised on the transaction by Qatalyst Partners and Goodwin Procter, LLP. JPMorgan Chase & Co. acted as a financial adviser and Jones Day acted as legal adviser to SAP.
