Monday 16 September 2019

SAP to buy Qualtrics in $8bn deal

Cashing in: Ryan Smith, who will stay on as CEO, his family and other shareholders are in line to collect €7bn from the sale
Cashing in: Ryan Smith, who will stay on as CEO, his family and other shareholders are in line to collect €7bn from the sale

Stefan Nicola and Joyce Koh

SAP is making its largest acquisition yet as it battles startups, including Salesforce, in selling software to clients that want to better understand their customers.

The $8bn (€7bn) purchase of Qualtrics, whose software gathers and analyses data, is meant to strengthen SAP's offering in the customer relations management sector. It's a field Europe's biggest software company wants to gain a stronger foothold in because it's growing faster than its core enterprise software business.

Qualtrics last summer announced the creation of 350 jobs in Dublin, bringing its total here to about 600. SAP has an Irish workforce of more than 2,000 across its offices in Dublin and Galway.

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. It had been planning on listing on Nasdaq with a potential valuation of $4.5bn.

SAP fell as much as 4.7pc in early Frankfurt trading as analysts questioned the price. It's an expensive plan to buy growth, said Neil Campling, an analyst at Mirabaud. The offer price, about 20 times Qualtrics's sales, is an "extremely high multiple, which ever way you look at it", he said.

SAP, led by CEO Bill McDermott, has secured financing of €7bn. "Tuck-ins are tuck-ins but transformative deals are transformative deals," Mr McDermott said. Qualtrics sees sales exceeding $400m this year and forecasts 40pc growth.

Its planned IPO was more than 13 times oversubscribed, said CEO Ryan Smith. He will continue to lead the company, which will maintain dual headquarters in Provo, Utah, and Seattle. It was valued at $2.5bn in a 2017 private funding round and its customers include Microsoft, JetBlue Airways and General Electric.

Qualtrics resisted taking venture money for over a decade before finally agreeing to deals with Accel and Sequoia Capital. Ryan, who reportedly once turned down a $500m offer, family members and other shareholders are set to get about $7bn for their shares.

"We want to be working with SAP and that's what we're excited about," Smith said.

Bloomberg

Irish Independent

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