SAP swoops up Qualtrics for $8 billion right before IPO

German-based software company SAP SE (SAP) agreed to acquire Qualtrics for $8 billion in an all-cash deal, which is expected to close in the first half of 2019. The boards of directors of both companies and the shareholders of Qualtrics have approved the transaction.

Qualtrics is a Utah-based experience management company, whose main rival is SurveyMonkey (SVMK). Like its competitor, who went public two months ago, Qualtrics was also preparing for an IPO, that was said to be 13x oversubscribed, when SAP stepped in.

Qualtrics, which makes most of its money from subscriptions, is ahead of SurveyMonkey in terms of size and pace of growth. It also generated more revenue than SurveyMonkey during the first half of this year. Qualtrics’ customer base includes several leading companies like Microsoft (MSFT), Kellogg (K) and Mastercard (MA).

Qualtrics is the second largest acquisition to-date for SAP 

SAP, which has a market cap of $128 billion, has been expanding its cloud business for a while and is looking for new product and growth opportunities as it tries to reduce its dependency on desktop software. The company has made a couple of acquisitions over the past few years, including the purchase of Callidus at the start of 2018, but Qualtrics is its second largest one to-date.

The acquisition provides both companies with significant benefits along with the opportunity to move into customer relationship management. Qualtrics has the potential to provide value to SAP and its customers as a whole new business division but it also faces the risk of having its wings clipped as it becomes part of a larger organization.

Several technology companies have made major acquisitions this year with the largest one being the purchase of Red Hat (RHT) by IBM (IBM) for $34 billion.

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