SAP just agreed to sell its stake in Qualtrics — all 423 million shares — as part of the company's $12.5 billion acquisition by Silver Lake and CPP Investments.

Silver Lake Management Company and Canada Pension Plan (CPP) Investment Board submitted a proposal on March 3, to acquire all outstanding shares in Qualtrics, a leading provider of experience management (XM) software, including all shares of company common stock owned by SAP, for a purchase price of $18.15 per share in cash — and after taking just over a week to consider it, SAP accepted the terms — meaning its stake will be acquired for approximately $7.7 billion.

Private, Public, Private: Experiences in XM

SAP acquired Qualtrics in 2019 for $8 billion. However, in a move that caught some insiders off guard, SAP took Qualtrics public in 2021, with a valuation of nearly $21 billion, allowing it to operate independently, yet still retaining ownership over a majority of the stock.

But by January 2023, SAP announced its intent to carry out “a targeted restructuring in select areas of the company,” a shakeup that not only included slashing 3,000 jobs — or about 2.5% of its global workforce, but also its intent to explore a sale of its stake in Qualtrics. Following the announcement, the company solicited proposals from potential buyers — and it appears Silver Lake and CPP offered the best deal, meaning Qualtrics will go back to being a private company.

Related Article: SAP Announces Layoffs and Possible Sale of Qualtrics Stake

What’s in It for SAP?

By selling its stake in Qualtrics, SAP is able to unlock value for its shareholders and streamline its operations to better align with its long-term plans — a shift in focus to cloud-based software and services.

In a letter summarizing 2022, Klein told shareholders, the year “was a stark reminder that no one business, government, or society can tackle the greatest challenges of our time alone” and therefore, “a change is needed” — a change Klein said could unlock significant value for both companies, with SAP able to focus more on its core business and profitability and Qualtrics able extend its leadership in the experience management category.

“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,” Klein said in a statement. “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’ success.”

Learning Opportunities

Founded in 1999, Silver Lake Management Company is a private equity firm specializing in technology investments and providing them with strategic guidance, operational support and financial resources. Some notable investments include those in Alibaba, Dell Technologies, Airbnb and Expedia. Silver Lake CEO, Egon Durban, currently serves as a director on the Qualtrics board.

What’s in It for Qualtrics?

With the goal to further growth in the XM market, Qualtrics Founder and Executive Chairman Ryan Smith appears pretty enthusiastic about the deal.

“I couldn’t be more excited for this step in our journey,” said Smith. “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.”

Qualtrics will continue to be led by its current CEO, Zig Serafin, and the company will remain headquartered in Provo, Utah and Seattle, Washington.

 “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,” Serafin said in a statement.

The Qualtrics board, comprising a committee of independent directors, along with the SAP Executive and Supervisory Boards, has granted approval for the transaction, which is anticipated to be finalized in the latter half of 2023, subject to regulatory approvals.

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