U.S. private equity group, Silver Lake, and Canada's largest pension fund have agreed to buy Qualtrics for $12.5 billion, making it the largest private equity buyout of the year.
Qualtrics, a Utah-based specialized software analytics tool, is a giant in the experience management sector. The company generated $1.5 billion in annual sales last year – a 36% increase, with more than 80% of those revenues coming from recurring subscriptions. Prior majority stakeholder SAP owned a 71% stake in Qualtrics before the merger. The consortium that is acquiring Qualtrics is led by Silver Lake's funds but includes CPP Investments, which will provide $1.75 billion.
“I couldn't be more excited for this step in our journey,” said Ryan Smith, the Co-Founder of Qualtrics, in a statement. “Silver Lake's belief in our vision and their amazing track record of helping founders and management teams speaks for itself.”
Silver Lake has a long history of investing with entrepreneurs, working with Michael Dell to take his computer company private in 2013. They also have led investments in Smith's businesses before, such as leading a $507 million round of funding in 2021 for property management software Entrata. 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.
While it's expected to offer financial flexibility for new growth investments, with equity financing estimated to be over $10 billion and debt to be just $1 billion, experts from the Financial Times see benefits and risks with this approach. The lack of leverage in the deal is particularly significant, as it suggests that investors are taking a cautious approach in the current economic climate. With rising interest rates and growing concerns about the health of the broader financial markets, many investors seek to reduce their risk exposure and maintain greater financial flexibility.