They were planning to go public in weeks, not years. Looks like the founders/board opted for a guaranteed payday (2-3x share price premium) over stock market uncertainty, but it still seems like an odd decision.
$7 billion cash-out for the family that controls Qualtrics, perhaps an irresistible opportunity.
It's 30x $266m in profit. They might need to get to $3b or $4b in sales to reach that kind of annual profit generation, if they spend like most SaaS companies do to pursue growth. They might have seen blips over the next five or six years where their valuation ran higher than $8b without the fundamentals to support it (assuming everything went according to plan in the business), however, averaged over time I find it hard to believe they could support an $8b market cap without a dramatic size increase. This party market won't last forever. Excellent sale by the owners (all cash at that, avoiding the downside risk in SAP's stock at 32x earnings; in any other market SAP gets a 20 PE or lower).
I also suspect that as a public company, assuming the time it takes to scale to justify an $8b-$10b style market cap (five or six years at least, likely more), and the dilution they'd suffer as a family when it comes to employee stock compensation over time, they might need something more like a $12b+ stable future outcome to match where they're already at with SAP. Introduce business risk, economic risk, stock market risk, and a lot of years to get from here to there - the $7b would seem to make great sense for the Smith family. The best reason to not take this deal, is to keep control of the company - as it is, the Smiths get to keep running it anyway post acquisition and don't have to deal with public shareholders et al.
I am baffled by the valuation. I use Qualtrics often for data collection but I never knew it was valued at multiple billions. What's their main revenue source? I don't believe that B Schools pay them so much to warrant this kind of valuation.
They sell to enterprises. They have customers like BMW, Southwest, etc. They get MBAs to learn to use them in school, then when they have to use a product when they get a job at a fortune 500, they go with Qualtrics since they know how to use it. That's how they got a lot of market penetration.
Acquisitions are sometimes strategic, i.e. it's not what they are doing, but what they will do. It's now accepted that you can lose to startups, and (like bugs), it's cheaper the earlier you nip the acorn in the bud (to clash metaphors). It can indicate the acquirer's own opinion of their competitive vulnerabilities.