Just Days Before a Planned IPO, Qualtrics Is Acquired By SAP for $8 Billion

November 12, 2018, 6:09 AM UTC

It appears tech darling Qualtrics won’t get to use the stock ticker symbol “XM” after all.

The maker of survey software tools had been expected to go public later this week, after filing for an IPO in October. But on Sunday, enterprise software giant SAP announced that it would acquire Qualtrics for $8 billion in cash.

“We’ve been on the road all week, we were supposed to ring the bell on Thursday,” Ryan Smith, CEO and co-founder of Qualtrics, told Fortune during a phone interview after the announcement was made. Smith helped start the company, which calls its product category “customer experience management software,” in 2002 in Provo, Ut., where he was raised. His co-founders included his brother and his father, and the startup didn’t take any outside funding until 2012.

Qualtrics has been one of the most anticipated tech IPOs of the year, and the deal came as a surprise. But SAP’s playbook is not entirely unique: In June, HR software maker Workday snapped business planning software firm Adaptive Insights off the IPO market. In both cases the larger tech companies paid a premium over what the smaller players would have achieved had they gone public.

Qualtrics, which turned a small profit of $2.6 million on $289.9 million in revenue in 2017, had raised a total of around $450 million in venture capital from firms like Accel, Insight Venture Partners and Sequoia Capital. Most recently, it had been valued at $2.5 billion.

Qualtrics had planned to raise as much as $495 million in its IPO, which would have doubled that most recent valuation. Smith told Fortune that the Qualtrics IPO was “13 times oversubscribed,” due to investor demand. But selling to SAP for $8 billion is clearly a better deal for the CEO and the company’s other stockholders. As for SAP, it gets another cloud player to add to its arsenal (in recent years, the German software behemoth has also bought human resources software maker SuccessFactors and expense management service Concur).

“Yes, we did pay a handsome price, but it’s well-deserved,” SAP CEO Bill McDermott told Fortune late Sunday. According to McDermott, the acquisition presents a new category for SAP, and is not an integration play. That’s why Qualtrics will stay an independent company, with its headquarters and management intact. (Former SuccessFactors CEO Lars Dalgaard stayed on board for just about a year post-acquisition, while Steve Singh, ex-CEO of Concur, left less than three years after selling his company to the enterprise giant.)

“This is the most simple, if not the easiest thing we’ve ever done on the M&A front,” McDermott said. “This [Qualtrics] is our crown jewel.”

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