It’s the same message Smith gave to SAP CEO Bill McDermott and then to his 2,000 employees over a whirlwind weekend that saw Qualtrics pivot from a planned IPO to a blockbuster acquisition — the second-biggest in SAP’s history.
Smith and McDermott spoke with CNBC on Monday from a hotel in downtown San Francisco, where they had just arrived after flying in from Provo. They were in town for press meetings during the day before heading to Palo Alto to meet with employees at SAP’s Silicon Valley office.
SAP, which specializes in enterprise resource management software, had been in casual talks for several months with Qualtrics. In late summer, McDermott had lunch with Ryan Smith, his brother and co-founder, Jared, and Scott at Marea, an Italian restaurant in midtown Manhattan. They talked about entrepreneurship, building a business and some areas where their companies overlap. SAP serves critical software to the world’s biggest companies, and Qualtrics, at a much smaller scale, sells software to help companies understand and retain their customers and employees.
“We really weren’t in M&A discussions at that point,” McDermott said. “We were like-minded individuals, very cloud oriented, very growth oriented. I’m obsessed with customers. Ryan is obsessed with their experiences.”
Sometimes a lunch is just a lunch. And while McDermott was running a company with 95,000 people across the globe, Smith was working full speed towards an IPO.
Qualtrics hired Goldman Sachs and Morgan Stanley to lead its offering and publicly filed its prospectus in October. SurveyMonkey, its biggest rival in the survey software market, had gone public the prior month, and it was immediately clear that Qualtrics would command a much higher market value because it’s the bigger and more profitable of the two, and is growing faster.
Smith and the Qualtrics team spent early November on the road talking to public market investors and readying them for the upcoming offering.
But this past Saturday night, McDermott boarded a plane from New York to Provo with a plan that he wasn’t certain would work. From 39,000 feet in the air, he called Smith with a proposal. He wanted to see if Smith would be willing to pass up a Nasdaq listing and join forces with SAP. At the time, investors were clamoring for shares in a company that was likely to be valued at between $5 billion and $6 billion and, given how cloud software companies trade, was almost guaranteed to pop in its debut.