By Chloe Aiello
Days before customer experience management company Qualtrics was expected to debut on the Nasdaq, enterprise software giant SAP snatched it off the market ー in a deal the CEO bragged is as big for SAP as the purchase of Instagram was to Facebook.
The German software company announced on Sunday it would acquire Qualtrics for $8 billion in cash ー which almost doubles the market capitalization the Utah-based company was expecting to have after its initial public offering. In a document filed with the Securities and Exchange Commission, Qualtrics said it planned to offer 20.5 million shares at $18 to $21 per share ー which means Qualtrics likely would have boasted a market capitalization of about $4.6 billion after its Nasdaq premiere.
Financially, the deal makes sense for Qualtrics' co-founders, brothers Ryan and Jared Smith and their father, Scott. Together, their share of the company is now worth about $2.6 billion, according to Dan Primack, a business editor at Axios.
Primack told Cheddar Monday the deal will give Qualtrics access to more data and resources.
"For Qualtrics, they kind of get to do a little bit of what Google ($GOOGL) gets to do, right? They get to tie into a bigger player that's got a broader range of data, and they get to kind of create that combined merged company ー something Google's been able to create organically."
For SAP, the maneuver is also strategic.
Qualtrics calls itself an "experience management" company, or "XM" ー also the company's proposed ticker. In practice, it offers cloud-based subscription software that assists in collecting and analyzing data a company can use for market research, concept testing, and customer engagement. It competes with companies, like SurveyMonkey ($SVMK) which, for its part, has had a rocky few weeks since its own IPO in September.
SAP, on the other hand, deals in operational data and is especially known for its work in enterprise resource planning, customer relationship management, and human resources. SAP counts Salesforce among its rivals.
SAP CEO Bill McDermott commented on the two companies' synergies in a statement on the acquisition: “SAP already touches 77 percent of the world’s transactions. When you combine our operational data with Qualtrics’ experience data, we will accelerate the [experience management] category with an end-to-end solution with immediate global scale."
Primack added that McDermott referred to the deal on a conference call as just "as transformative for SAP as buying Instagram was for Facebook ($FB)."
"From SAP's perspective, they've got all of this data on user transactions," Primack said. "And what Qualtrics has is information on the experience of those transactions."
This isn't SAP's first major deal. It's not even the first time a company has swooped in to disrupt a highly-anticipated enterprise IPO, illustrating just how in-demand enterprise and cloud-based companies really are. In 2014, SAP acquired enterprise software company Concur for $8.3 billion. Earlier in 2018, Workday ($WDAY) agreed to acquire Adaptive Insights for $1.55 billion in the week leading up to its public debut.
SAP shares were down about 6.4 percent in trading on Monday.
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