In one of the most surprising acquisitions of the year, SAP has agreed to purchase Qualtrics for $8 billion in cash, pre-empting the enterprise software company’s planned public offering.
The announcement comes about a week after Qualtrics, which makes software to help other businesses conduct surveys and market research, filed with the SEC to raise about $400 million by selling 20.5 million shares on the NASDAQ. The IPO would have valued the company at roughly $4.3 billion, about half of what SAP is paying.
The $8 billion price tag makes the deal the biggest VC-backed SaaS acquisition in history, according to PitchBook data. Here’s a look at where it falls among the world’s top VC-backed SaaS takeovers of all time:
Note: All the deals in the chart above are complete except the SAP-Qualtrics transaction, which is expected to close in the first half of 2019.
As you can see, the acquisition of Qualtrics tops that of open-source software provider GitHub, which Microsoft picked up in a $7.5 billion deal that closed last month, for the No. 1 spot. In addition to representing the top two VC-backed SaaS acquisitions in recent history, Qualtrics and GitHub have also produced some of the largest venture-backed exits of any kind in the US so far this year, with the IPO of Dropbox and the direct listing of Spotify among the other top deals.
Qualtrics, which is based in Provo, UT, and maintains a second headquarters in Seattle, is currently the most valuable VC-backed company in Utah.
Ryan Smith and Jared Smith helped co-found the business out of their parents’ Utah basement in 2002, well before an emerging collection of tech companies caused the Salt Lake City-Provo-Park City area to become known as Silicon Slopes. Ryan, who’s the company’s CEO, and Jared, who oversees technical operations, will remain in charge of Qualtrics, which will operate as a division of SAP upon completion of the deal. The brothers are set to become billionaires with the acquisition. Other big winners include Accel, Insight Venture Partners and Sequoia, all of which were listed as major shareholders on the company’s now-moot IPO filing.
All in all, Qualtrics has raised $400 million in equity funding—all of it coming in the last six years, after Qualtrics eschewed VC backing during its first 10 years of existence. Its first round of funding came in mid-2012, when Accel and Sequoia poured $70 million into the company. Then came a $150 million round in 2014 led by Insight Venture Partners that valued the company at $1 billion. Last year, the business raised $180 million at a valuation of $2.5 billion from all three existing backers.
Qualtrics says it’s been cash-flow positive since it was founded and reportedly claims to have turned a profit last year and in the first nine months of 2018. The company is projecting $400 million in revenue for this year, up from $290 million in 2017.
The purchase marks at least the third time in the last two years a high-profile tech company has canceled an IPO in favor of a big acquisition. In the beginning of 2017, Cisco announced it would acquire AppDynamics for $3.7 billion just days before the software company was set to hit the public markets. And earlier this year, Workday picked up fintech company Adaptive Insights for roughly $1.5 billion just before its IPO became official.
Featured image of Qualtrics CEO Ryan Smith via JD Lasica (CC by 2.0)
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