CPP Investments and Silver Lake Take Qualtrics Private in a $12.5 B Deal
Silver Lake and CPP Investments on Monday announced plans to acquire Qualtrics for $12.5 billion, marking the second time the survey software company has been bought in less than five years.
Shares of Qualtrics were up more than 6% Monday.
The companies will acquire 100% of Qualtrics’ outstanding shares, according to a statement released Monday. This includes the majority ownership interest of SAP, which acquired Qualtrics for $8 billion in 2018.
The all-cash deal has been approved by Qualtrics’ board of directors and a Qualtrics committee of independent directors, according to the statement. SAP also approved the transaction in its capacity as Qualtrics’ principal shareholder. No other shareholder approval is required.
Once the transaction is complete, Qualtrics will become a privately held company and its common stock will no longer be listed on public markets. Shareholders, including SAP, will receive $18.15 per share in cash under the terms of the agreement, according to the statement.
Morgan Stanley advised Qualtrics on the deal, and Barclays acted as the financial adviser to SAP. JPMorgan advised Silver Lake.
Qualtrics gets most of its sales from subscriptions and also generates revenue from a research-on-demand option that existing customers can use to get feedback from “a curated group of respondents,” and from professional services.
Qualtrics was founded in 2002 by brothers Ryan and Jared Smith and their dad, Scott, along with Stuart Orgill. The company is based in Provo, Utah.
“I couldn’t be more excited for this step in our journey,” Ryan Smith, who serves as the company’s executive chairman, said in the statement. “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.”
Ashee Pamma of IT World Canada also reports Qualtrics to be acquired by CPP Investment Board and Silver Lake for US$12.5 billion
Qualtrics, an experience management software company used by the likes of Coca-Cola, Pfizer and Uber, announced yesterday that it has entered into a definitive agreement to be acquired by investment firm Silver Lake and the Canada Pension Plan (CPP) Investments, in a US$12.5 billion all-cash transaction.
Software giant SAP first acquired Qualtrics in 2019 and took it public in 2021, with an initial public offering (IPO) valuation of nearly $21 billion.
It traded above its IPO valuation in its first year as a public company, but took a hit over the past year like many other tech companies, plummeting to a low of US$5 billion, where it has remained since.
In a letter summarizing 2022, Christian Klein, chief executive officer of SAP, 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”.
Accordingly, in January 2023, SAP announced restructuring plans for select areas of the company, including 3,000 job cuts, as well as stating the intent to sell its stake in Qualtrics.
Silver Lake and CPP Investments submitted a proposal on Mar. 3, offering to acquire 100 per cent of the outstanding shares that Silver Lake does not already own, including the entirety of SAP’s majority ownership interest, a transaction that valued Qualtrics at US$12.5 billion.
As part of the transaction, SAP sold all of its 423 million shares at a purchase price of US$18.15 per share, totalling US$7.7 billion.
Following the acquisition, expected to close in the second half of 2023, Qualtrics will go back to being a privately held company. It will continue to be led by CEO Zig Serafin and will remain headquartered in Utah and Washington.
Klein also stated that “SAP intends to remain its close go-to-market and technology partner, servicing joint customers and continuing to contribute to Qualtrics’s success,” adding that the number of companies and brands using Qualtrics software grew from 10,000 to over 18,000 since SAP’s purchase.
Earlier this week, CPP Investments and Silver Lake issued a press release on this deal:
Reaches definitive agreement to become an independent, private company
Positions the pioneer and leader in Experience Management for its next chapter of growth at scale
Qualtrics shareholders to receive $18.15 per share in cash, a 73% premium to 30-day unaffected VWAP
PROVO, Utah & SEATTLE – March 13, 2023 – Qualtrics (NASDAQ: XM), the leader and pioneer of the experience management (XM) software category, announced that it has entered into a definitive agreement to be acquired by Silver Lake, the global leader in technology investing, in partnership with Canada Pension Plan Investment Board (CPP Investments), in an all-cash transaction that values Qualtrics at approximately $12.5 billion.
Silver Lake and its co-investors, together with CPP Investments, will acquire 100% of the outstanding shares Silver Lake does not already own, including the entirety of SAP’s majority ownership interest. Qualtrics will become an independent, privately held company positioned to drive category-defining innovation and efficient growth at scale on its path to becoming the next great enterprise cloud software platform.
Under the terms of the agreement, Qualtrics shareholders, including SAP, will receive $18.15 per share in cash. This represents a 73% premium to the 30-day volume-weighted average price on January 25, 2023, the last full trading day prior to SAP’s announcement to explore a sale of its stake in Qualtrics, and a 62% premium relative to the unaffected closing price on January 25, 2023.
Qualtrics will continue to be led by Chief Executive Officer Zig Serafin. The company will remain headquartered in Provo, Utah and Seattle, Washington.
“I couldn’t be more excited for this step in our journey,” said Ryan Smith, Qualtrics Founder and Executive Chairman. “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 is becoming central to how businesses make mission critical customer and employee decisions that increase revenue and operational efficiency. With our AI-powered platform and automated actions, we help companies deliver exceptional experiences and build deep relationships with their customers and employees at scale,” said Zig Serafin, Chief Executive Officer at Qualtrics. “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.”
“We are strong believers in the amazing technology platform that Ryan, Zig and their phenomenal engineering and sales teams are building, and we’re thrilled to support the continued efficient growth of Qualtrics into a generational, highly profitable platform company by enabling further investment across all aspects of the business, including areas such as AI and other powerful new technologies,” said Egon Durban, Co-CEO of Silver Lake. “This is a landmark transaction for Silver Lake, reflecting our confidence in the team and their vision. As they shape and continue to grow the next great enterprise software platform, they are the kind of leaders we have been most excited to partner with over many years of technology investing.”
“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,” said Christian Klein, CEO and Member of the Executive Board of SAP SE. “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’s success. The number of companies and brands using Qualtrics software has risen from 10,000 at the time of SAP’s purchase to over 18,000 today.”
“We would like to thank SAP for their stewardship of Qualtrics over the past four years,” said Kyle Paster, Managing Director at Silver Lake. “We are pleased to be joined by a high-quality investor and bank group in supporting Ryan, Zig and the rest of the Qualtrics team with a low leverage capital structure designed to fuel the company’s next stage of growth, broadening the power of the Qualtrics technology platform.”
“This is a unique opportunity to invest in a category creator led by a strong management team that is shaping a rapidly growing market,” said Hafiz Lalani, Managing Director and Head of Direct Private Equity at CPP Investments. “We look forward to supporting the team in driving continued innovation as they help clients re-define their customer and employee experiences around the world.”
Transaction Details
The transaction is fully financed by equity commitments from Silver Lake and co-investors together with $1.75 billion in equity from CPP Investments and $1 billion in debt.
Qualtrics’s Board of Directors, as well as a Qualtrics committee of independent directors, has approved the transaction, which has also been approved by SAP in its capacity as the principal shareholder of Qualtrics. No other shareholder approval is required. The transaction is expected to close in the second half of 2023, subject to the satisfaction of customary closing conditions, including the receipt of the requisite regulatory approvals.
Upon completion of the transaction, Qualtrics’s common stock will no longer be listed on any public market.
Qualtrics and SAP intend to maintain a go-to-market and technology partnership to both service existing joint customers and target new customer opportunities.
For further information regarding all terms and conditions contained in the definitive merger agreement, please see Qualtrics’s Current Report on Form 8-K, which will be filed in connection with this transaction.
Advisors
Morgan Stanley & Co. LLC acted as financial advisor to Qualtrics, and Goodwin Procter LLP acted as legal advisor.
Barclays Capital Inc. acted as financial advisor to SAP SE, and Shearman & Sterling LLP acted as legal advisor.
Goldman Sachs & Co. LLC acted as financial advisor to a Qualtrics committee of independent directors and Freshfields Bruckhaus Deringer US LLP acted as legal advisor.
J.P. Morgan acted as financial advisor and Latham & Watkins LLP and Simpson Thacher & Bartlett LLP acted as legal advisors, with regard to the transaction and to the debt financing, respectively, to Silver Lake.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the 21 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At December 31, 2022, the Fund totaled C$536 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.
About Qualtrics
Qualtrics, the leader and creator of the experience management category, is a cloud-native software provider that helps organizations quickly identify and resolve points of friction across all digital and human touchpoints in their business – so they can retain their best customers and employees, protect their revenue, and drive profitability. More than 18,750 organizations around the world use Qualtrics’s advanced AI to listen, understand, and take action. Qualtrics uses its vast universe of experience data to form the largest database of human sentiment in the world. Qualtrics is co-headquartered in Provo, Utah and Seattle, and operates out of 28 offices globally. To learn more, please visit Qualtrics.com.
About Silver Lake
Silver Lake is a global technology investment firm, with more than $92 billion in combined assets under management and committed capital and a team of professionals based in North America, Europe and Asia. Silver Lake’s portfolio companies collectively generate more than $272 billion of revenue annually and employ approximately 681,000 people globally.
About SAP
SAP’s strategy is to help every business run as an intelligent, sustainable enterprise. As a market leader in enterprise application software, we help companies of all sizes and in all industries run at their best: SAP customers generate 87% of total global commerce. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers’ businesses into intelligent enterprises. SAP helps give people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption. Our end-to-end suite of applications and services enables business and public customers across 25 industries globally to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, SAP helps the world run better and improve people’s lives. For more information, visit www.sap.com.
This take-private deal announced earlier this week is huge, it involves Silver Lake, one of the best technology private equity firms, its co-investors and CPP Investments.
As stated above, the acquisition of Qualtrics for US$12.5 billion marks the second time the survey company has been bought in less than five years:
Software giant SAP first acquired Qualtrics in 2019 and took it public in 2021, with an initial public offering (IPO) valuation of nearly $21 billion.
It traded above its IPO valuation in its first year as a public company, but took a hit over the past year like many other tech companies, plummeting to a low of US$5 billion, where it has remained since.
Clearly if Silver Lake and its partners paid a healthy premium to take Qualtrics private, it's because they see tremendous value in this tech company and will take their time to unlock it over the next couple of years.
Also, this speaks volumes:
“I couldn’t be more excited for this step in our journey,” Ryan Smith, who serves as the company’s executive chairman, said in the statement. “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 is a lot more than just a survey company:
It sounds corny -- build technology that closes experience gaps -- but this is becoming critically important in terms of creating and improving productivity gains.
And even at $18 a share, representing a nice premium, it's still a good deal for Silver Lake, CPP and other co-investors:
The attractiveness of this deal to CPP Investments is scale, but there are toher considerations:
“This is a unique opportunity to invest in a category creator led by a strong management team that is shaping a rapidly growing market,” said Hafiz Lalani, Managing Director and Head of Direct Private Equity at CPP Investments. “We look forward to supporting the team in driving continued innovation as they help clients re-define their customer and employee experiences around the world.”
Hafiz Lalani, Managing Director and Head of Direct Private Equity at CPP Investments, was just recently appointed to this position. He and his team have a big job trying to find sizable and attractive co-investment deals like this for CPP Investments leveraging off his network and their premiere investment partners.
Remember, CPP Investments allocates roughly 32% of its total assets to Private Equities, so it's an important asset class and they need to reduce fee drag for the program to remain competitive.
To do this, they need to engage with partners and gain access to top co-investments, ie large transactions where they pay no fees (unlike fund investments).
This has been the secret recipe at CPP Investments since Mark Wiseman's time and this is how it will always be in order to maintain a healthy allocation to this asset class.
I look forward to seeing how Silverl Lake, CPP Investments and others will unlock value in Qualtrics over the next couple of years which will be critical years.
Below, four years ago, Fox 13’s Bob Evans sat down with tech entrepreneur and CEO of Utah-based Qualtrics, Ryan Smith. Great interview, listen to what he says about delivering a great experience.
I also shared below some of Qualtrics customers' success stories and there are plenty more here. If you want to understand why top global brands entrust Qualtrics with their shares experience, watch these clips.
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