SAP is spinning out an acquisition it once likened to Facebook’s bet on Instagram

July 27, 2020, 2:12 PM UTC

On Sunday, SAP announced plans to spin off and list Qualtrics, a U.S.-based company analyzing customer feedback that it bought for $8 billion in 2018.

Why the news is surprising: For starters, it’s been less than two years since the German software company snapped up Qualtrics, then days before the latter (backed at the time by the likes of Accel, Insight, and Sequoia) went public. The former SAP CEO that chaired the deal, Bill McDermott, also likened it to Facebook’s $1 billion acquisition of Instagram—a unit so essential to the social media company that it generated roughly a quarter of Facebook’s sales in 2019.

Companies seem to like invoking the Facebook-Instagram spirits whenever pricing comes under scrutiny. After all, Facebook acquired the photo-sharing company for a seemingly enormous sum when it had a mere 13 employees—yet that bet has massively paid off. SAP too was criticized at the time for overpaying for its Qualtrics deal. While early indications, at the time of Qualtrics’ initial IPO filing in 2018, valued it at roughly $4.5 billion to $5 billion, SAP paid, well, much more than that. 

In 2020, Qualtrics doesn’t appear to be a bad payoff for SAP—with the current market rally, analysts at Jefferies estimate Qualtrics could be valued at as much as 14 billion euros ($16 billion). But, as my colleague Michal Lev-Ram notes, “When viewed through the lens of the original intent of the acquisition (growing both companies as one), it’s hard to imagine that everything went as smoothly as planned.” Facebook, at least, has yet to spin off a portion of Instagram.

SAP for its part will maintain majority ownership of the newly public company, with the duo acting as partners. Qualtrics founder Ryan Smith, meanwhile, intends to be its largest individual shareholder. The deal also comes after McDermott’s departure in 2019, which eventually led to Christian Klein taking the reins fully. Read more.

CrossFit gets its buyer: All gym chain operators have been under pressure during the coronavirus. One gym that the headlines have been unusually loud about: CrossFit, a Washington D.C.-based company that licenses its name to over 14,000 locations worldwide, and whose founder and former CEO Greg Glassman stepped down in June following widespread criticism of his comments on the death of George Floyd

Private equity firm Berkshire Partners is now acquiring the firm alongside Eric Roza, a CrossFit athlete who said in June that he would buy the company from Glassman and become its CEO.

Lucinda Shen
Twitter: @shenlucinda


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