Data Rules — SAP acquires Qualtrics

The News

Here is the full announcement for you to read:

WALLDORF, Germany, PROVO, Utah, SEATTLE, Wash. SAP SE(NYSE: SAP) and Qualtrics International Inc. (Qualtrics) today announced they have entered into a definitive agreement under which SAP SE intends to acquire Qualtrics, the global pioneer of the experience management (XM) software category that enables organizations to thrive in today’s experience economy.

  • Together, SAP and Qualtrics to accelerate the new XM category by combining experience data and operational data to power the experience economy
  • Creates a highly differentiated offering for businesses to deliver superior customer, employee, product, and brand experiences
  • Ryan Smith to continue to lead Qualtrics; Qualtrics to maintain dual headquarters in Provo, Utah, and Seattle, Wash.

Under the terms of the agreement, SAP will acquire all outstanding shares of Qualtrics for US$8 billion in cash. SAP has secured financing in the amount of €7 billion to cover purchase price and acquisition-related costs. The purchase price includes unvested employee incentive compensation and cash on the balance sheet at close. Subject to customary closing conditions and attainment of regulatory clearances, the acquisition is expected to close in the first half of 2019. The Boards of Directors of SAP and Qualtrics have approved the transaction. Qualtrics’ shareholders have also approved the transaction.

SAP CEO Bill McDermott said: “We continually seek out transformational opportunities — today’s announcement is exactly that. Together, SAP and Qualtrics represent a new paradigm, similar to market-making shifts in personal operating systems, smart devices and social networks. SAP already touches 77 percent of the world’s transactions. When you combine our operational data with Qualtrics’ experience data, we will accelerate the XM category with an end-to-end solution with immediate global scale. For Qualtrics, this introduces a dynamic new partner with the belief, passion and scale to bring experience management to millions of customers around the world.”

McDermott added: “The combination of Qualtrics and SAP reaffirms experience management as the groundbreaking new frontier for the technology industry. SAP and Qualtrics are seizing this opportunity as like-minded innovators, united in mission, strategy and culture. We share the belief that every human voice holds value, every experience matters and that the best-run businesses can make the world run better. We can’t wait to stand beside Ryan and his amazing colleagues for the next chapters in the experience management story. The best for Qualtrics and SAP is yet to come!”

Ryan Smith, CEO of Qualtrics, said: “Our mission is to help organizations deliver the experiences that turn their customers into fanatics, employees into ambassadors, products into obsessions and brands into religions. Supported by a global team of over 95,000, SAP will help us scale faster and achieve our mission on a broader stage. This will put the XM Platform everywhere overnight. We could not be more excited to join forces with Bill and the SAP team in this once-in-a-generation opportunity to power the experience economy.”

SAP and Qualtrics Will Together Deliver the Transformative Potential of Experience Data (X-Data) Combined with Operational Data (O-Data)

SAP Will Accelerate Qualtrics’ Growth and Further Its Mission by Offering Global Scale, Reach and Resources

Qualtrics expects full-year 2018 revenue to exceed US$400 million and projects a forward growth rate of greater than 40 percent, not including potential synergies of being part of SAP.

Following the closing of the transaction, Qualtrics is expected to maintain its leadership, personnel, branding and culture, operating as an entity within SAP’s Cloud Business Group. Ryan Smith will continue to lead Qualtrics, and Qualtrics is expected to continue to maintain dual headquarters in Provo, Utah, and Seattle, Washington.

Qualtrics was advised on the transaction by Qatalyst Partners and Goodwin Procter, LLP. J.P. Morgan acted as financial advisor and Jones Day acted as legal advisor to SAP.

The plan is to improve the ability to build “customer experiences” by combining SAP’s existing access to more than three quarters of business transactions with data about actual experiences, which is what Qualtrics does deliver.

SAP pays the enormous amount of 8 billion USD for Qualtrics, a company that predicts to have revenue of 400 million USD in 2018. This makes it the biggest acquisition ever done by SAP. Additionally, a multiple of 20 on the revenue is high; even considering a growth rate of 40 per cent. Even more interestingly, SAP makes this an all cash acquisition.

The Bigger Picture

Experience is not only about customer experience but also about other stakeholders, for example employees.

On the other hand, customer experience, as a category, is not manageable. Customer experience is the customer’s perception of a company that was developed over time. Once could define it as the sum total of all interactions and experiences that a customer had with the company in this time. What is manageable, are the individual engagements that at the end of the day create this customer experience. At least it is possible to influence these experiences. So, on an atomic level companies can work on how they are perceived.

And one of the core ingredients for this is asking the customers.

My PoV and Analysis

The coverage of not only customer experience but also the related brand experience and product experience plus employee experience that Qualtrics sells is a very good strategic fit for SAP. It emphasizes on the SAP Customer Experience Suite story that got unveiled during SAPphire and the intelligent enterprise messaging that surrounds it.

As a side effect SAP gets access to a strong survey suite that augments the existing one.

Qualtrics, on the other side, gets the power of a huge sales force and partner ecosystem. This should enable it to scale globally fast.

But what do customers get?

And finally there is the 1,000 dollar question: How about the Open Data Initiative?

ODI is all about connecting data. Adding the capabilities of Qualtrics to the mix is of value to all customers. Hence it is to all members of the initiative. It will be interesting to see how this pans out. If Qualtrics becomes part of it then ODI is truly open. Else it is a line of defence also against Microsoft (as Oracle and Salesforce are no members of ODI).

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Thomas Wieberneit

Helping businesses to improve in Digital Transformation, Customer Engagement, Customer Experience, CRM, Innovation