SAP seeks public listing for $8bn Qualtrics

The German software company SAP plans an initial public offering for Qualtrics, the US company that it bought for $8bn two years ago.

Christian Klein, SAP’s chief executive, said that while Qualtrics had “performed above and beyond all expectations” an IPO was now a “win-win” for both sides.

The 40-year-old, who took full control of SAP in April after the departure of co-chief executive Jennifer Morgan, added that Qualtrics was “not that close to the core” of SAP and had not been integrated as tightly as other acquisitions.

SAP swooped to buy Qualtrics in 2018 as the Utah-based company was preparing for an IPO. Founded in 2002, Qualtrics began as an online survey company, competing with the likes of SurveyMonkey, and initially specialised in software for academics to carry out research.

It has grown to offer a suite of tools to survey customer and employee feedback, and its 12,000 customers include Microsoft, Volkswagen, Shell and the UK’s NHS.

SAP said at the time of the acquisition, which priced Qualtrics at about 20 times its annual revenues, that it would help entice companies to adopt the German company’s S4/Hana software, by offering insights on their employees and customers.

“There are millions of complaints every day about disappointing customer experiences,” said SAP’s former chief executive, Bill McDermott said as he laid out the rationale for the purchase. “This is called the experience gap.” 

Luka Mucic, SAP’s chief financial officer, declined to say how much of Qualtrics would be offered, but suggested that a range of 10 to 15 per cent is the “regular size”. He added that the proceeds would give SAP “latitude” for further investments.

SAP will retain a majority shareholding and Ryan Smith, Qualtrics’ founder and chief executive, plans to be the company’s largest individual shareholder.

Mr Klein said the IPO “also enables Ryan [Smith] and his leadership team to really also go after the market outside of SAP . . . maybe over time to do some targeting acquisitions and so on.

“At the end, it’s also about retaining the best people you have,” he added, suggesting that the move was partly made to mollify Qualtrics’ management. “With this move, of course, we also now have Ryan and the leadership team fully excited about the years to come.”

Julian Serafini, an analyst at Jefferies, questioned the independence being given to Qualtrics, which he said, “leads us to question the degree of integration that was achieved, as well as future integration plans”.

As Qualtrics will now be operating on its own, “it will probably be required to be able to enter into partnerships or integrations with other software vendors, some of which may compete with SAP,” he added.

Most recently SAP deployed Qualtrics to gather feedback from its customers’ employees about returning to workplaces in the wake of Covid-19.

SAP did not reveal the timing of the planned IPO, saying it would be dependent on the market environment.

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