US private equity group Silver Lake has agreed to buy Qualtrics for $12.5bn alongside Canada’s largest pension fund in the biggest private equity buyout of the year.
Silver Lake assembled one of the heftiest equity cheques for a private equity buyout, which lowered the financing burdens of the deal. The manoeuvre helped talks progress despite a dearth of buyout financing due to rising interest rates and growing concerns about the health of broader financial markets. The group will pay $18.15 per share, which values Qualtrics at $12.5bn.
The deal is the culmination of a months-long negotiation as Qualtrics owner SAP worked to divest its 71 per cent stake as part of a restructuring of the German software group.
“Silver Lake has both the operational expertise and the track record with software companies to help Qualtrics extend its leadership in the [experience management] category it pioneered,” said Christian Klein, chief executive of SAP.
Equity financing will be more than $10bn, while debt will be just $1bn. The lack of leverage is expected to offer financial flexibility for new growth investments.
Qualtrics invented specialised software analytics tools that help companies respond to their online customers. It generated $1.5bn in annual sales last year, a 36 per cent increase, with more than 80 per cent of those revenues coming from recurring subscriptions.
The consortium includes co-investors in Silver Lake’s funds and CPP Investments, which will provide $1.75bn.
Ryan Smith, the billionaire co-founder of Qualtrics who in 2018 sold the Utah-based software group to SAP for $8bn, is also expected to participate in 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.”
SAP listed Qualtrics three years later and this year notified shareholders of its plans to divest its majority stake. Silver Lake, which already owns more than 4 per cent of Qualtrics shares, signalled interest in taking the business private in January.
This month, it presented a formal offer to buy the company for $12.4bn, a 73 per cent premium to the group’s trading price before SAP made its divestiture plans public.
Smith is the chair of Qualtrics and one of its largest shareholders with a stake worth more than $200mn, according to securities filings. He is expected to have a meaningful equity interest in the private company. In 2020, Smith acquired the National Basketball Association’s Utah Jazz for nearly $1.7bn.
Silver Lake has been close to Qualtrics for years and has made large investments alongside Smith before.
Egon Durban, co-chief executive of Silver Lake, has acted as a director on the Qualtrics board since its spin-off from SAP was completed. Zig Serafin, Qualtrics’s current chief executive, is expected to remain in the role.
In 2021, the private equity group led an investment in a property management software company alongside Smith. Silver Lake has a long history of investing with entrepreneurs, working with Michael Dell to take his personal computer company private in 2013.
“This is a landmark transaction for Silver Lake,” said Durban, who also highlighted the firm’s plan to work with Smith and Qualtrics’ existing leadership to grow the company using heavy investments in areas such as artificial intelligence.
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