SAP snaps up experience management software company Qualtrics for $8B

Mae Love
November 15, 2018

SAP will acquire Qualtrics International, a developer of experience management or "XM" applications, for $8 billion in cash, the two companies said Sunday evening.

Qualtrics offers comprehensive market research and data analysis cloud software that complements SAPs offerings.

Qualtrics collects data on customers, brand, employees and products - such as emails, social media posts and in-app data - to give companies insights into how their customers behave or feel about them.

SAP's core strength lies in helping some of the world's biggest firms run their finance, logistics and human resources operations.

"Experience data plus operational data are a powerful combination", McDermott told reporters on a call. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers' businesses into intelligent enterprises. Investors were wary of the deal as the Frankfurt stock market opened on Monday, with SAP stock shedding 4.4 per cent by 9:55am (0855 GMT) to trade at 90.00 euros, against a DAX index of blue-chip German shares down 0.75 per cent.

"Might be a valid strategic rationale and top-line growth is impressive, but it's still expensive", said one trader.

In an interview with Forbes, Ryan Smith and SAP CEO Bill McDermott "said they'd gotten to know each other more closely over recent weeks, even as Smith pursued a road show he says was 13x over-subscribed". The deal, which has been approved by the boards of both companies, is expected to close in the first half of 2019.

Baader Helvea analyst Knut Woller said that at 21.5 times trailing annual revenue, the price SAP was paying is almost double the multiples in comparable recent deals of 11.2 times.

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Qualtrics sees sales exceeding $400m this year and forecasts a forward growth rate of greater than 40%. We've collected many of them and share them with you below. The company is based in Provo, Utah, not Prove, Utah.

That IPO could have valued the company at $5 billion or more, right out of the gate. "The potential synergies between the company - Qualtrics focusing on experience data, SAP on operational data - made working together an easy prospect, says Smith", Alex Konrad writes.

Over 9,000 enterprises worldwide, including more than 75% of the Fortune 100 and 99 of the top 100 USA business schools, rely on Qualtrics to consistently build products that create more loyal customers, develop a phenomenal employee culture and build iconic brands. While the $8 billion price had been agreed to weeks ago, Smith struggled with the idea of losing control of the company he founded, said the person.

McDermott said he and Smith met a few months back and quickly struck up a friendship: he said he arrived for lunch one day at Smith's home in a suit and dress shoes, and the two ended up playing basketball in the yard.

We're saying and we're very clear on this, we're going to grow total revenue in double-digit, operating income in double-digit, not to mention being the fastest growing cloud company in the world.

Almost 70 acquisitions. "SAP has to set its own footprint", Gartner Senior Director/analyst Ilona Hansen said, "and is developing its own unique culture going forward to be successful and for standing out of their competitors".

Qualtrics was advised on the transaction by Qatalyst Partners and Goodwin Proctor, LLP.

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