SAP is planning to spinoff Qualtrics just twenty months after its acquisition in 2018.

On Sunday, SAP announced that it is planning to spinoff Qualtrics just twenty months after acquiring the company for  $8 billion in 2018. However, the company revealed that it will remain the majority owner of Qualtrics after the spinoff.  

In the filing submitted by the company, it was revealed that the spinoff would not affect SAP's long-term financial target since it would still maintain its hold as a majority owner of the company. The document also revealed that Qualtrics CEO and co-founder, Ryan Smith, is expected to be the company's largest individual shareholder. 

Both companies did not disclose any information on the time the spinoff would take place. However, in a statement provided by Forbes, Smith said "Ever since we founded Qualtrics, our goal has been to help companies have a conversation at scale about the experiences their employees and customers are having and leverage our system to take action. This is an exciting time to be part of Qualtrics and SAP, and we’re excited to continue building out the XM ecosystem.” 

XM is a term used to describe Qualtrics' experience management. It is the major category of the company's software that added to its popularity. 

In 2002, Qualtrics was founded by Smith, his brother, and his father. Thereafter the company experienced a breakthrough for Utah's tech community and was subjected to a Forbes profile in 2017. After this, the company begins to work on becoming a publicly-traded company in the following year. However, before it could achieve its aim, Germany-based SAP paid $8 billion in cash to secure the company. The deal was formally closed in January 2019.

Following the deal, Forbes valued Smith's net worth at $1.3 billion. 

Notwithstanding, acquiring the company for $8 billion was considered unusually splashy for SAP because this is a price 20x its expected revenue in 2018. In addition to this, the CEO behind the acquisition, Bill McDermott announced his departure from the company a few months after. McDermott claimed that his resignation has nothing to do with activist investor Elliot Management taking a 1% stake in the company. 

With the outbreak of the pandemic and the resulting economic impact, Qualtrics has been seen as one of the brightest spots for the SAP company. Qualtrics software has greatly benefited the company through its strong market performance. Though Qualtrics has the potential to attract more customers for itself, it is still benefiting from SAP customer base. 

To spin off the company at a time when the nation is still grappling with the economic impact of the pandemic is considered an early move by SAP.  However, in a statement provided by Forbes, Christian Klein, who took over as the sole CEO of the company in April after serving as a co-CEO alongside the former executive Jennifer Morgan, said “Qualtrics beat our expectations.” He added that, despite the spinoff, the company would remain as an important part of SAP. "We are and will be fully committed to Experience Management and Qualtrics being a key element of our Intelligent Enterprise Strategy,” Klein said.

In spite of this, the fact remains that the major challenge of spinoff is for both companies to maintain their relationship. The spinoff itself is not the problem but the execution is. Usually, two years after the spinoff, both companies find it difficult to handle their relationship. Addressing this issue, Qualtrics said in a statement that "It’s rare to have the leadership team of an acquired company remain intact almost two years post-acquisition,” Qualtrics’ CEO said. “It demonstrates the strength of SAP/Qualtrics partnership.”

Qualtrics and SAP would only hope that the IPO would be one of its best decisions.