Qualtrics (XM) adds to gains as Silver Lake plans bid, analyst sees $20 takeover value

Qualtrics International (NASDAQ: XM) added to strong gains made in January after 15% shareholder Silver Lake disclosed Wednesday morning that it plans to bid for the company. News of the potential private equity bid comes days after controlling shareholder, SAP AG (NYSE: SAP), announced it has decided to explore a sale of its stake in Qualtrics.

SAP acquired Qualtrics and has increased revenue by 3.5x to ~ $1.5 billion since the acquisition.

"In line with SAP’s strategic initiative to streamline its portfolio, SAP has decided to explore a sale of its stake in Qualtrics," SAP said in a statement at that time. "This would be a continuation of the strategy we set at the time of the Qualtrics IPO in 2021. SAP believes that this potential transaction could unlock significant value for both companies and their shareholders: for SAP, to focus more on its core cloud growth and profitability; for Qualtrics, to extend its leadership in the XM category that it pioneered."

In a 13D filing this morning, Silver Lake said it "currently intends to submit a proposal," which it said, "could also lead to one or more subsequent revised or different proposals."

Silver Lake said the proposal could result in it "acquiring all or substantially all of the outstanding capital stock", which would "result in a de-listing and de-registration of the Class A Common Stock."

Following the news, Evercore ISI analyst Kirk Materne raised his price target on XM to $20, saying he expects the potential private equity bid to drive the near-term performance of the stock. Materne expects XM to "ultimately be valued in line with other recent P/E acquisitions or roughly ~7-8x NTM sales."

The analyst also thinks Qualtrics founder Ryan Smith "could join up with any bidding consortium and help assure a smooth transition." In addition to a full buyout, "there is also the possibility of leaving the public company intact and simply transferring SAP’s ownership to a financial buyer," the analyst added.

By StreetInsider.com Staff

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