What was set to be Google’s biggest-ever acquisition has unexpectedly collapsed, as talks for a $23 billion (£18 billion) takeover of Israeli cybersecurity firm Wiz were called off.
Wiz CEO Assaf Rappaport confirmed the decision to end negotiations in a note to staff, seen by Reuters, in which he explained that the company would now focus on its original plans for an initial public offering (IPO). “Saying no to such humbling offers is tough, but with our exceptional team, I feel confident in making that choice,” Rappaport stated.
The collapse of the talks with Google is a surprising turn, given Wiz’s rapid growth and ability to secure substantial funding on its own. In May, the firm successfully raised $1 billion from investors at a $12 billion valuation, long before Google came forward with a much higher offer. The decision to remain independent and pursue an IPO demonstrates Wiz’s confidence in its future prospects, despite the lucrative acquisition proposal.
The news comes as a setback for Google, which has been aggressively seeking to bolster its cloud infrastructure capabilities. As competition intensifies in the cloud space, particularly with rivals Amazon Web Services (AWS) and Microsoft Azure leading the market, the acquisition of Wiz was seen as a critical move for Google. The tech giant had hoped to strengthen its position in the growing cybersecurity sector, which is key to securing its cloud business.
In 2022, Google acquired Mandiant, a leading US cybersecurity firm, for $5.4 billion, marking a significant step in its strategy to expand its cybersecurity capabilities. However, the Wiz talks represented a much larger commitment, signalling Google’s ambition to dominate the cloud security space and challenge the dominance of AWS and Azure.
Dr Marc Manzano, general manager of cybersecurity at SandboxAQ, commented: “Google has been lagging behind Amazon Web Services and Microsoft Azure. The potential acquisition of Wiz highlights Google’s ambition to dominate the cloud security space.” With Wiz’s advanced capabilities in cloud-native security and its rapidly growing reputation within the industry, the company was seen as a strong fit for Google’s strategy to compete more effectively in this area.
The cancellation of the Wiz deal follows the collapse of another potential acquisition for Google — marketing software firm HubSpot. Sources indicate that talks with HubSpot, which were believed to be in advanced stages, fizzled out several weeks ago. The end of both discussions suggests that Google’s acquisition strategy may be facing more hurdles than expected, especially as regulatory scrutiny of big tech mergers and acquisitions increases.
The potential deal with Wiz was also likely to face intense scrutiny from competition regulators, who have become increasingly wary of mergers and acquisitions in the tech sector. Given Google’s already dominant position in search, advertising, and cloud infrastructure, the Wiz acquisition could have raised concerns over market concentration, with regulators questioning whether such a merger would stifle competition.
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Interestingly, Rappaport’s decision to reject the acquisition offer could have been influenced by recent developments within the cybersecurity industry. Last week, rival CrowdStrike suffered a significant blow when a botched software upgrade led to widespread IT outages and thousands of flight cancellations. This incident resulted in a dramatic drop in CrowdStrike’s share price, losing around a third of its value and wiping billions of dollars from its market cap.
As a result, boards of major clients are reportedly rethinking their cloud and security strategies, with some considering diversifying their security providers to avoid overreliance on a single vendor. This scenario could have emboldened Rappaport, providing him with greater confidence to go it alone rather than align with a tech giant like Google.
While Google may have missed out on an opportunity to bolster its cybersecurity and cloud services, Wiz’s decision to remain independent demonstrates the growing confidence of tech firms in their ability to scale and innovate without the need for big-money acquisitions. Whether or not Wiz’s IPO will replicate the success of its acquisition offer remains to be seen, but the firm’s future is undoubtedly one to watch in the rapidly evolving cybersecurity landscape.
