(Bloomberg) SAP SE is making its biggest acquisition yet, as it fights rivals, including Salesforce.com Inc., which sells software to customers who want to better understand their customers.
The $ 8 billion Qualtrics International Inc. quote, whose software collects and analyzes data, is intended to strengthen SAP's offering in the customer relationship management sector. It's a field Europe's largest software company wants a stronger foothold, as it grows faster than the company's core business software.
Based in Utah, Qualtrics collects data about customers, brands, employees, and products, such as email, social media and data in the app, to give companies insights about how their customers behave or feel about them. The start had planned to record on Nasdaq in a deal with a potential valuation of up to 4.5 billion dollars.
SAP fell as much as 4.7% at the beginning of Frankfurt trade on Monday, as analysts questioned the price of the deal. It's an expensive plan to buy growth, "says Neil Campling, analyst at Mirabaud. The offer price, about 20 times Qualtric's sales this year, is an "extremely high multiple, depending on how you look at it," he said in emailed comments.
SAP, headed by CEO Bill McDermott, has secured $ 7 billion ($ 7.9 billion) funding to pay for the purchase, said the company late on Sunday. This is the German company's largest business deal so far, according to Bloomberg's compilation, and bought in 2014 its acquisition of Concur Technologies Inc. for $ 7.2 billion.
"Tuck-ins are connections, but transformative offers are transformative offers," McDermott said at a conference call. "You would have to do a lot of tuck-ins and spend a lot of years tucking things to do what we did here."
SurveyMonkey, a close rival, increased as much as 67% in its trading debut in September after online polling started $ 180 million in its larger than targeted US initial public offer. However, the agreement was initially priced below its $ 2 billion valuation in a 2014 private financing round.
Qualtrics sees sales above $ 400 million this year and forecasts continued growth of over 40%. Their planned stock market launch was more than 13 times over, says CEO Ryan Smith. The company was valued at $ 2.5 billion in a private finance round in 2017 and its customers include Microsoft Corporation, JetBlue Airways Corp and General Electric Co.
Customers do not need comprehensive code skills to use Qualtric's tools, and can use features like automated sentiment analysis of open text responses. Saks Fifth Avenue Inc. uses Qualtrics to create questionnaires for feedback on their fashion brands; Whole Foods Market Inc. uses it to collect and analyze the qualifications of its employees.
"SAP launches a larger push to CRM, which grows by 20% and becomes one of the biggest software software markets," said Holger Schmidt, analyst at Bankhaus Metzler. "It's about gathering more data about products, customers and supply chains."
SAP predicts that the transaction will be closed in the first half of 2019, and Qualtrics will act as a unit within SAP's cloud business group. Ryan Smith, Qualtric's CEO, will continue to lead the company, which will maintain dual headquarters in Provo, Utah and Seattle.
Qualtrics resisted investing money for over a decade before they finally agreed to trade with Accel and Sequoia Capital. Ryan, who allegedly once threw down a $ 500 million offer for his company, his family members and other major shareholders are now ready to get about $ 7 billion for their shares.
"We want to work with SAP and that's what we're most pleased with," Smith said on the call.
Qualtrics discussed the transaction of Qatalyst Partners and Goodwin Procter, LLP. JPMorgan Chase & Co. acted as financial advisor and Jones Day served as legal advisor for SAP.
Sign up for a free subscription to B2BecNews, published 4x / week, covering technology and business trends in the growing B2B e-commerce industry. B2BecNews is published by Vertical Web Media LLC, which also publishes DigitalCommerce360.com, Internet Reseller and Internet Health Management.
Follow us on LinkedIn and be the first to know when new B2BecNews content is published.