Silver Lake set to take over software company Qualtrics in $12.5bn deal

US private equity group Silver Lake has agreed to buy Qualtrics for $12.5bn alongside the software company’s billionaire co-founder Ryan Smith and Canada’s largest pension fund.

The takeover, expected to be announced on Monday morning, marks the largest private equity buyout of the year as rising interest rates make it increasingly difficult to finance large-scale takeovers.

It comes as Qualtrics owner SAP divests its 71 per cent stake as part of a restructuring of the German software group.

Silver Lake has assembled a broad consortium of equity investors to lower the financing burdens of the deal. The manoeuvre has helped talks progress despite a dearth of buyout financing due to rising interest rates and concerns about global economic growth.

Equity financing for the deal is expected to be more than $10bn, while debt will be $1bn, according to people with direct knowledge of the takeover. The group will pay $18.15 per share, which values Qualtrics at $12.5bn, the people said.

Qualtrics pioneered 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 of investors investing alongside Silver Lake includes CPP Investments. Ryan Smith, the billionaire co-founder of Qualtrics who in 2018 sold the Utah-based software group to SAP for $8bn, is expected to also participate in the deal, according to sources.

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. In 2021, the private equity group led an investment in a property management software company alongside Smith.

Silver Lake declined to comment. Representatives for Qualtrics and CPP Investments could not immediately be reached for comment.