PROVO — Just weeks ahead of a planned public stock offering aiming to raise $500 million in new capital, Utah-grown business survey/analytics company Qualtrics was acquired by German tech giant SAP for a whopping $8 billion.
Industry watchers are calling it one of the biggest ever acquisition price tags for a venture-backed enterprise software company.
The cash deal, announced Sunday, blows by estimates that pegged Qualtrics' value, post-stock offering, in the $4.5 billion to $5 billion range.
Qualtrics co-founder and CEO Ryan Smith noted the size of the acquisition put it in rarefied air, even in a current realm where billion-dollar-plus deals have become passé.
"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," Smith said in a statement. "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."
Qualtrics was founded in 2002 by Ryan and Jared Smith based on technology first developed by Ryan and his father, BYU researcher and professor Scott Smith, amid the elder Smith's fight (it was successful) against throat cancer. Initially conceived of as a tool for academics, the company and its platform has since evolved into a tech behemoth that leverages survey input and a business analytics engine to let its clients — now numbering over 9,000 — know exactly how well, or not, their companies are performing.
The deal mints a family of billionaires with the Smith brothers and their father collectively owning about 45 percent of the company, according to their IPO filings.
SAP is a multinational that specializes in business and customer service software and operates in 180 countries. The company had nearly $27 billion in revenues in 2017. SAP CEO Bill McDermott underscored the significance of what Qualtrics accomplished in creating an entirely new software product category.
"We continually seek out transformational opportunities — today's announcement is exactly that," McDermott said in a statement. "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."
SAP also indicated its intention to maintain Qualtrics' current operational structure, with Ryan Smith remaining as CEO and the company continuing to maintain dual headquarters in Provo and Seattle.
Word of the mega-deal traveled quickly through the Utah business community on Sunday. Utah Gov. Gary Herbert celebrated the news as an affirmation of the state's world-class accomplishments in the tech industry.
"Qualtrics has grown from a garage in Utah County to the target of an $8 billion acquisition from one of the world’s best known software companies," Herbert said in a statement. "That is quite a journey and one heck of an acquisition. Today's news speaks volumes about the great entrepreneurial spirit found in our state."
The SAP acquistion of Qualtrics marks 2018 as a breakout year for homegrown technology firms in the state. Farmington's cloud-based tech education company Pluralsight went public in May, blowing past their pricing estimates and raising $310 million in the effort while American Fork business intelligence/analytics company Domo hit the public markets in June, pulling in $193 million.
Clint Betts, executive director of the Lehi-based tech industry advocacy group Silicon Slopes, called the impact of the Qualtrics deal "monumental."
"Silicon Slopes is thrilled to welcome SAP to our community," Betts said in a statement. "Ryan Smith and Qualtrics just put an $8 billion exclamation point on the most consequential year in Utah tech history. With this record-shattering deal, Ryan and Qualtrics have cemented their legacy as Silicon Slopes legends.
"Just as impressive, I’m confident you’ll never find more humble or dedicated leaders. This is a monumental day for Silicon Slopes and Utah."
The Governor's Office of Economic Development also weighed in on the deal, with Executive Director Val Hale calling it further evidence of the high viability of Utah-grown entrepreneurial efforts.
"This is another victory for Utah’s Silicon Slopes," Hale said in a statement. "Ryan Smith and his team have done a remarkable job innovating and building Qualtrics into a multibillion-dollar business. This is proof that businesses can start, grow and flourish in Utah."12 comments on this story
Fiscal details released by Qualtrics in a mid-October filing with the U.S. Securities and Exchange Commission reflect a company that has continued to perform at a very high level with annual revenue growing over 50 percent from $190.6 million in 2016 to $289.9 million in 2017. The company also surged into profitability in the same time period, turning $12 million in losses in 2016 to $2.6 million in positive cash flow in 2017, according to its disclosures.
In a Sunday news release, Qualtrics estimated its 2018 revenues would exceed $400 million and expects continued annual growth in excess of 40 percent.