US private equity group Silver Lake and Canada’s largest pension fund have offered $12.4bn to buy experience management software company Qualtrics, in what would be one of the largest buyouts of the year.
The potential transaction comes as SAP, Qualtrics’ majority owner, tries to divest a 71 per cent stake as part of restructuring of the German software group.
SAP acquired Qualtrics, a seller of software tools companies use to survey customers and employees, for $8bn in 2018 and listed it in the US three years later.
After SAP notified shareholders of its plan to divest its stake, Silver Lake, which owns a 4.1 per cent stake in Qualtrics, expressed interest in taking the Utah-based software company private last month.
Silver Lake and the Canada Pension Plan Investment Board, its partner on the proposed buyout, are offering to pay $18.15 per share in cash for Qualtrics, or a 6 per cent premium to Friday’s closing share price. The price represents a 73 per cent premium from Qualtrics’ trading value before SAP notified shareholders of its intention to divest its stake.
Silver Lake and CPPIB will have until March 15 to exclusively negotiate the takeover with SAP and Qualtrics. If finalised, the deal would mark the largest private equity takeover of the year. Rising interest rates have made it hard to finance buyouts, and concerns about the health of the global economy have made some investors fearful that public market valuations could fall.
Two other unnamed bidders have also made takeover proposals to Qualtrics, the company said in a securities filing on Monday, signalling that the takeover effort may draw new bids.
Silver Lake has had ties to Qualtrics since it was relisted on the Nasdaq exchange in early 2021. Egon Durban, co-chief executive of Silver Lake, has acted as a director on Qualtrics’ board since the spin-off from SAP was completed.
In 2021, Silver Lake led an investment in a property management software company alongside Ryan Smith, the billionaire founder of Qualtrics who is also its board chair and a large minority shareholder.
Though rising interest rates have made it hard for private equity investors to finance acquisitions, software companies have been the exception. Specialised buyout groups such as Thoma Bravo and Vista Equity Partners have in recent months turned to private lenders and large equity backers such as sovereign wealth funds to assemble financing packages for large takeovers of software groups.
Silver Lake is one of the largest buyout groups globally with $92bn in assets and a focus on investing in technology-enabled companies. It is also the second-largest shareholder in City Football Group, the owner of Manchester City, which is controlled by Sheikh Mansour bin Zayed Al Nahyan, the billionaire Abu Dhabi royal.
The Menlo Park-based investment group is best known for partnering with personal computer billionaire Michael Dell on the $24bn buyout of his eponymous PC company in 2013, then acquiring EMC Corporation three years later.
Dell and Silver Lake are in the process of divesting a large part of that deal by selling VMware to Broadcom for $69bn, which could return up to $15bn in cash to the duo if approved by global antitrust regulators.