Qualtrics SoldQualtrics has announced that Silver Lake, in partnership with Canada Pension Plan Investment Board (CPP Investments), will acquire the shares of Qualtrics in an all-cash transaction at $18.15 per share for a total of around $12.5 billion. The sum represents a 73% premium to 30-day Volume Weighted Average Price (VWAP) on January 23rd. Silver Lake already has a small investment in Qualtrics and will now buy the remainder of the shares, including those held by SAP, the majority owner.

This is a good outcome for SAP after it acquired Qualtrics for $8 billion in 2019, listed the company in 2020 and announced its intention to sell its 70% stake on  January 23rd 2023.

Once the transaction completes, Zig Serafin, Chief Executive Officer, will continue in his role, and no major changes will occur initially. Its HQ will remain in Provo, Utah and Seattle, Washington.

Zig Serafin, Chief Executive Officer, Qualtrics
Zig Serafin, Chief Executive Officer, Qualtrics

Serafin commented, “Qualtrics is becoming central to how businesses make mission critical customer and employee decisions that increase revenue and operational efficiency. With our AI-powered platform and automated actions, we help companies deliver exceptional experiences and build deep relationships with their customers and employees at scale.

“We are incredibly excited to partner with the team at Silver Lake, who deeply understand our business and will help us continue to build a high performing company, invest in our innovation and expand our ecosystem to help our customers succeed.”

Qualtrics has just completed its annual Summit with a flurry of announcements, including partnerships with Five9, Merkle and Twilio, new Frontline Digital solutions, and other product announcements. Under its new ownership, it will continue to define and evolve the experience category it leads.

Qualtrics Founder and Executive Chairman Ryan Smith commented, “I couldn’t be more excited for this step in our journey. Silver Lake’s belief in our vision and their amazing track record of helping founders and management teams speaks for itself. We look forward to working together and driving category-defining growth to build the next great enterprise cloud platform.”

SAP exits Qualtrics, and PE steps in

This is a good deal for both SAP and Qualtrics. For SAP, while it never managed to leverage the synergy between the two sets of products it expected, Qualtrics has thrived under its ownership.

Christian Klein, CEO and Member of the Executive Board of SAP SE, commented, “Silver Lake has both the operational expertise and the track record with software companies to help Qualtrics extend its leadership in the XM category it pioneered. Since we acquired Qualtrics in 2019 the company has more than tripled its revenue while delivering profitability. SAP intends to remain a close go-to-market and technology partner, servicing joint customers and continuing to contribute to Qualtrics’s success. The number of companies and brands using Qualtrics software has risen from 10,000 at the time of SAP’s purchase to over 18,000 today.”

Kyle Paster, Managing Director at Silver Lake, added, “We would like to thank SAP for their stewardship of Qualtrics over the past four years. We are pleased to be joined by a high quality investor and bank group in supporting Ryan, Zig and the rest of the Qualtrics team with a low leverage capital structure designed to fuel the company’s next stage of growth, broadening the power of the Qualtrics technology platform.”

Importantly Qualtrics and SAP will maintain a go-to-market and technology partnership to both service existing joint customers and target new customer opportunities.

Silver Lake invests for growth

For Silver Lake, this is a large and bold investment. It needs to turn what is already a profitable company into something much greater. That may not be an easy task, but it sees an opportunity. The question is how it will achieve this. Silver Lake will provide most of the funds, adding $1 billion in debt and another $1.75 billion from CPP Investments. Both the Qualtrics and SAP boards already approve the transaction. Once the transaction completes in H2 2023, Qualtrics will delist from the NASDAQ and once more enter private ownership.

Egon Durban, Co-CEO of Silver Lake, commented, “We are strong believers in the amazing technology platform that Ryan, Zig and their phenomenal engineering and sales teams are building, and we’re thrilled to support the continued efficient growth of Qualtrics into a generational, highly profitable platform company by enabling further investment across all aspects of the business, including areas such as AI and other powerful new technologies. This is a landmark transaction for Silver Lake, reflecting our confidence in the team and their vision. As they shape and continue to grow the next great enterprise software platform, they are the kind of leaders we have been most excited to partner with over many years of technology investing.”

CPP Investments continue to invest in software vendors. In September last year, it participated in the $40 million Series C extension of Tray.io. This latest investment sees it join a category leader and one where it sees a greater opportunity.

Hafiz Lalani, Managing Director and Head of Direct Private Equity at CPP Investments, commented, “This is a unique opportunity to invest in a category creator led by a strong management team that is shaping a rapidly growing market,” said “We look forward to supporting the team in driving continued innovation as they help clients re-define their customer and employee experiences around the world.”

Enterprise Times: What does this mean?

A huge investment by Silver Lake, but one where its end game is unclear. Will Silver Lake provide funds for growth, or will it continue to drive the trajectory that Qualtrics already has? The comments in the press release indicate that investments will continue in AI as Qualtrics continues to dominate the experience sector.

When the dust has settled on the acquisition, it will be interesting to hear why Silver Lake invested and how it hopes to accelerate growth. For SAP, this gives it a war chest for further acquisitions or possibly buying back shares. It will be interesting to see what it intends to use the money once the deal closes.

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