Google-Wiz $23bn deal collapses

Google’s record $23 billion acquisition of Wiz has fallen apart, with the Israeli cybersecurity startup opting to pursue an initial public offering (IPO) instead.

Google’s parent company, Alphabet, was in advanced talks to acquire Wiz, valued at $12bn. The acquisition would have been Google’s largest to date, eclipsing its $600 million acquisition of DeepMind in 2014.

Founded in 2020, Wiz has quickly grown into a major player in the cybersecurity sector. It has attracted significant venture capital investments from major firms like Sequoia Capital and Thrive Capital.

The planned acquisition was significant not only because of its size but also because of its potential to change the competitive environment of cloud security.

Acquiring Wiz would have bolstered Google’s position against major competitors like Microsoft and Amazon Web Services in the cloud services market.

What led to the collapse of the Google-Wiz deal?

Once the negotiations became public, internal opposition grew stronger. Reports claim members of both companies’ boards had reservations about the deal.

Both Google and Wiz were wary of potential regulatory hurdles. The antitrust environment has become increasingly stringent, particularly for big tech acquisitions.

According to the Financial Times, a source close to the deal stated, “Lina Khan has killed another deal,” in reference to the chair of the Federal Trade Commission. Khan has garnered both praise and criticism for her actions since assuming the role.

In addition, Wiz’s leadership believed that pursuing an IPO would be more beneficial in the long term. A decision that reflects a strategic bet on the company’s future growth and valuation.

What are Wiz’s future plans?

Wiz has now set its sights on an initial public offering. CEO Assaf Rappaport said in a statement to employees, “While we are flattered by offers we have received, we have chosen to continue on our path to building Wiz…Our next milestones are $1bn in ARR and an IPO.”

The memo Wiz CEO sent his company after passing on a $23 billion deal from Google.

—
Wizards,

I know the last week has been intense, with the buzz about a potential acquisition. While we are flattered by offers we have received, we have chosen to continue on our path to…

— Austin Rief ☕️ (@austin_rief) July 23, 2024

Experts believe Wiz’s choice to reject Google’s offer and pursue an IPO is a bold move that underscores the confidence of its leadership and investors.

Neil Shah, head of tech and primary markets at the London Stock Exchange, said in a LinkedIn post, “The largest companies are built in public markets with evergreen capital. This is the mindset we need in Europe. The founders of Wiz are walking away from a billion-dollar payday and have put it back on the roulette table in the hope of a more rewarding outcome in the long term.”

John Idowu, cloud engineering lead at ATC Africa, said in a LinkedIn post, ” Wiz is banking on its own future by going ahead with its IPO plans. But to have the audacity to walk away from $23bn cash is truly incredible from the 4-year-old startup.”

How will this impact Google and the cybersecurity industry?

Google’s cloud segment has been under pressure to compete with Microsoft and AWS.

With regulatory scrutiny tightening, Google might focus on smaller, more manageable acquisitions or invest heavily in internal development to enhance its competitive edge, experts said.

The decision highlights the potential for high-growth cybersecurity startups to achieve significant valuations independently, shaping the competitive landscape.

Wiz’s rapid growth trajectory suggests that it is well-positioned to continue expanding its market presence.

“The market validation we have experienced following this news only reinforces our goal — creating a platform that both security and development teams love,” said Rappaport.

Wiz claims a significant portion of Fortune 100 companies are among its client base.

As it prepares for its IPO, it will need to focus on sustaining its growth momentum, scaling its operations, and meeting the expectations of public market investors.