SAP to make Qualtrics public less than two years after $8bn acquisition

SAP is planning to retain a majority stake in the feedback and survey software firm Qualtrics when it makes the subsidiary public, the company has announced.

The data analytics company will be made public through an initial public offering (IPO) in the US less than two years after the German software giant purchased the firm in an $8 billion acquisition. SAP bought Qualtrics just four days before it was set to go public in late 2018.

The purchase arose after SAP sought to boost its cloud portfolio, integrating Qualtrics’ XM Platform, a system for managing core business information, into a single platform.

"SAP's primary objective for the IPO is to fortify Qualtrics' ability to capture its full market potential within Experience Management. This will help to increase Qualtrics' autonomy and enable it to expand its footprint both within SAP's customer base and beyond,” SAP said in a statement.

"Qualtrics, which is part of SAP's cloud portfolio, has operated with greater autonomy than other companies SAP had previously acquired. The founder Ryan Smith and the current management team of Qualtrics will continue to operate the company.”

SAP will trim its ownership of Qualtrics from 100%, although it plans to retain majority ownership of the company, and says it has no intention of spinning off or divesting this interest in the firm. The company’s founder Smith, in addition, plans to be Qualtrics’ largest individual shareholder.

CEO Christian Klein said SAP’s acquisition of Qualtrics has been a success, outperforming expectations with 2019 cloud growth of more than 40%, “demonstrating very strong performance in the current setup”.

Indeed, Qualtrics' revenue rose 34% year-on-year in the second quarter of 2020, according to SAP’s financial results, with the segment earning €168 million (roughly £153,000,000). Many perhaps would naturally question why a change in ownership arrangement is needed at this stage,

Klein added he alongside senior figures including Ryan Smith decided an IPO would provide the greatest chance for Qualtrics to grow its market, as well as explore its own recruitment and acquisition strategies.

SAP would remain Qualtrics most important R&D and go-to-market partner, in line with its continued majority stake in the subsidiary, while giving the company more autonomy to broaden its partner and customer ecosystem.