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PROVO — Six years ago, Qualtrics CEO Ryan Smith said “no” to a half-billion dollar offer for a startup he began in his basement. It appears $8 billion was actually the magic number.
SAP, a German, multinational software corporation, will acquire the Provo unicorn for $8 billion in cash just weeks after the company filed to go public in what would have been the biggest IPO in Utah history, according to a news release Qualtrics released Sunday.
Instead, Qualtrics’ deal with SAP is the second-largest acquisition of a private tech company in history, Smith said. It trails only Facebook’s acquisition of messaging app WhatsApp for $19 billion in 2014.
"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."
Qualtrics’ software is a platform for businesses to manage customer, employee, product and brand experiences. SAP says it sees experience management as the future of business. The company has secured financing to cover the purchase price and acquisition-related costs, which include unvested employee incentive compensation and cash on the balance sheet at close.
“Together, SAP and Qualtrics represent a new paradigm, similar to market-making shifts in personal operating systems, smart devices and social networks," SAP CEO Bill McDermott said in a news statement. "SAP already touches 77 percent of the world’s transactions. ... For Qualtrics, this introduces a dynamic new partner with the belief, passion and scale to bring experience management to millions of customers around the world.”
The acquisition is expected to close in the first half of 2019, scrapping Qualtrics' plans to go public later this year.
At the end of October, Qualtrics filed for an IPO after Smith watched the startup he founded with his father, brother and college roommate in 2002 grow from the basement to a multi-billion dollar startup.
The deal is SAP's second-biggest acquisition ever, following an $8.3 billion purchase of travel and expense software company Concur in 2014, according to CNBC.
At Qualtrics’ last valuation, the company was worth $2.5 billion, so SAP is staking billions on the company.
Unlike other tech companies, Smith watched Qualtrics grow organically for 10 years as the Provo-based business "bootstrapped" its way to the top before taking outside money or venture capital. Qualtrics has since brought in about $400 million in venture financing after a $180 million funding round in April 2017 when the company received its latest valuation.
Qualtrics boasts an annual revenue growth over 50 percent after the company made about $190 million in revenue for 2016, then jumped to almost $290 million in 2017, according to the company's S-1 filing. The company also took in almost $185 million in revenue for the first six months of 2018 — meaning the company is growing about 27 percent compared to last year.
Qualtrics would have been the third local tech company to go public this year — fulfilling Smith’s prediction at the Silicon Slopes conference in January that “three or four” tech companies in Utah would make the jump.
Local tech education company Pluralsight went public in May with an offering over $350 million, and business analytics company Domo went public in late June with an offering of nearly $200 million.
Qualtrics was supposed to top them both. Smith will continue to lead Qualtrics, and the company will maintain dual headquarters in Provo and Seattle, Washington.
