Google believed that premium was justifiable given Wiz’s 70% annual sales growth and over $700 million annualized income.
Google announced that it is buying cybersecurity startup Wiz for $32 billion, its biggest deal (yet), as it wants to be the hare in the cloud computing race against Amazon and Microsoft.
This deal will make Wiz part of Google’s cloud unit and help strengthen the cybersecurity solutions that support the company in eradicating critical risks.
Alphabet wanted to seal the deal, so it agreed to pay a higher price than the $23 billion offer for Wiz last year, which the Israeli business turned down as the company was on a rapid growth course and wanted to pursue an initial public offering (IPO).
Some sources said that Wiz executives found it hard to reject Google’s updated offer, which valued the cybersecurity start-up 39% higher than the initial offer and also included a higher reverse break-up fee, a fee paid by the buyer to the seller to compensate the seller’s efforts and potential losses, of more than $3.2 billion or over 10% of the deal value payable to Wiz if the deal fails. It is one of the highest fees in M&A history.
Such a high break-up fee is once in a blue moon in M&A in the United States. However, they have been on the rise in recent years due to regulatory threats in large-scale M&A.
Google believed that premium was justifiable given Wiz’s 70% annual sales growth and over $700 million annualized income.
Sources claim that the two parties maintained contact even after the initial deal failure last year, as Google CEO Thomas Kurian was in hot pursuit of Wiz.
The insiders claimed that the discussions accelerated in the past two months after Donald Trump returned to his office.
Trump will continue his heavy scrutiny of Big Tech that he started during his first term. Wall Street expects a change in antitrust laws under the president, who picked Andrew Ferguson to lead the Federal Trade Commission, which may reduce regulations of big M&A(mergers and acquisitions).
Wiz works with cloud service providers, including Google Cloud, Microsoft’s Azure, and Amazon Web Services. Companies like Morgan Stanley, BMW, and Louis Vuitton Moët Hennessy (LVMH) are also clients.
Alphabet expects that the deal will close in 2026, pending regulatory approval.
Dave Wagner, portfolio manager at Aptus Capital Advisors, claimed that Google will have a microscope monitoring the deal by investors due to its poor track record with its capital monitoring strategy, especially regarding M&A.
Gil Luria, an analyst at DA Davidson, stated that Google bid for an increased price based on another year of exponential growth for Wiz.
He added that they need to offer a deeper suite of services, like security software to compete in the race with companies like Microsoft Azure.
Every company is rushing towards cybersecurity due to last year’s global CrowdStrike outage, which forced every company to spend more on defending their online domains.
In 2024, American cybersecurity company CrowdStrike started a faulty update to its Falcon Sensor security software, crashing every Microsoft Windows running the software.
Google announced that Wiz would still work with its rival cloud platforms, an attempt to cut off regulatory concerns.
Elise Phillips, policy counsel at Public Knowledge, a public interest advocacy group, claimed that generally speaking, Google is not the lion in the jungle of cloud business, and Wiz is still available on its rival cloud platforms. It would be a cause for concern if they have any exclusive deal between them in the future.
Google reported to have $23.47 billion in cash and cash equivalents as of Dec 31, hinting that it might seek financing from outside to seal the deal.
