Breakingviews - SAP ends pointless M&A roundtrip with Qualtrics

The exercise shows the danger of a large legacy company trying to integrate a younger and faster-growing one. In theory, SAP could have supercharged the groups’ combined revenue by offering its software to Qualtrics’ customers and vice versa. But the fact that Klein is now planning to offload the group while aiming to maintain a corporate partnership implies that SAP never needed to own the smaller company to do this.

One potential hiccup is that Qualtrics’ fairly paltry EBITDA limits how much debt Silver Lake can use. Even if it manages to fund the purchase with borrowings equivalent to 7 times next year’s projected $353 million of EBITDA, based on Visible Alpha data, the $2.5 billion total borrowings would only cover a fifth of the total purchase price, implying a giant $9 billion equity cheque.

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