SAP digs deep to acquire Qualtrics' 'customer experience' software
SAP has acquired ‘experience management' specialist Qualtrics in a $8 billion deal, buying the company just before it had planned an initial public offering (IPO).
The deal was finalised and announced late on Sunday evening, even as the company was conducting an investor roadshow intended to drum-up interest in its forthcoming IPO.
According to Qualtrics CEO Ryan Smith, the IPO was already 13 times over-subscribed, largely on the back of revenue growth of 40 per cent per annum in recent years.
Qualtrics' XM Platform enables organisations to collect feedback and other data from across customers, employees, product and brand in order to build a picture of overall ‘customer experience'.
Speaking on the first day of the SAP User group UK & Ireland annual conference, Adaire Fox-Martin, member of SAP's executive board in charge of Global Customer Operations, said that the aim of the acquisition was to flesh-out what SAP users can do for customers.
"Qualtrics provides experience data from the customer experience, how they perceive and feel about your products, good, services. SAP will provide the operational data from CRM, ERP and HCM [human capital management]," said Fox-Martin.
She continued: "The result, we believe, will be a very unique end-to-end experience and operational management system from the point of the very first interaction you have with the customer through to delivery and in after-sales service."
However, critics of the deal have been quick to point out that SAP is paying a high price for the company, which is expected to have revenues of just $400 million this year, with a net profit margin of only 0.8 per cent. The company had been expected to acquire a valuation at IPO of between $5 billion and $6 billion.
Furthermore, SAP CEO Bill McDermott had pledged earlier in the year to restrict SAP to much smaller deals following the $2.3 billion acquisition of Callidus Software.
SAP's stock price fell by almost five per cent on news of the deal, indicating investor scepticism over the price that the company is paying.
"McDermott plans to turbocharge its trajectory by using SAP's 15,000-person sales network to sell Qualtrics' software for collecting and analyzing market research and customer loyalty data," noted Bloomberg.
However, it will need to ramp up sales by a large amount in order to be able to justify the price it is paying for Qualtrics.