Google, the Internet search giant, is in advanced negotiations to acquire Wiz, a New York-based cybersecurity startup, for approximately $23 billion. This move comes amidst stringent scrutiny from the Biden administration against consolidation in the tech industry and other sectors. While the talks are advanced, they could still fall through according to sources close to the discussions.
A Significant Deal
Google’s acquisition of Wiz would mark a significant milestone, becoming the company's most expensive purchase, nearly doubling the $12.5 billion paid for Motorola Mobility in 2012. Despite potential resistance from regulators, Google appears prepared to face legal challenges to bolster its cloud computing division, which currently lags behind Amazon Web Services and Microsoft Azure.
Since taking office, President Joe Biden has intensified scrutiny of big tech acquisitions. The administration has blocked significant deals such as Penguin Random House's purchase of Simon & Schuster and JetBlue’s acquisition of Spirit Airlines. Amazon was also forced to abandon its attempt to buy iRobot due to regulatory opposition. In this context, the potential acquisition of Wiz could face similar scrutiny.
Thomas Kurian, CEO of Google Cloud, has been a key player in the negotiations to acquire Wiz. The purchase aligns with his strategy to strengthen Google Cloud's cybersecurity offerings, a division aiming to compete more aggressively with its main rivals. In recent years, Google has made several acquisitions to enhance its cloud computing services. In 2022, it acquired another cybersecurity firm, Mandiant, for $5.4 billion, and Siemplify for an undisclosed amount.
Founded in Israel in 2020 and now based in New York, Wiz has stood out for its rapid growth. The company has attracted major corporate clients like BMW, Slack, and Morgan Stanley, helping them mitigate cloud security threats. In May, Wiz announced that it had raised $1 billion in funding, reaching a valuation of $12 billion. Additionally, it reported that its annual recurring revenue had increased to $350 million, a significant improvement from $100 million two years earlier.
A History of Acquisitions and Challenges
Over the years, Google has taken a cautious approach to major acquisitions. Less than two years after acquiring Motorola, it sold the company to Lenovo, incurring significant losses. More recently, in 2021, Google bought Fitbit for $2.1 billion, a deal that also faced rigorous regulatory scrutiny before being approved. The potential acquisition of Wiz underscores Google’s ongoing interest in diversifying its revenue sources beyond online advertising, which still accounts for three-quarters of its total revenue. While the purchase of Wiz wouldn’t immediately transform Google’s financial landscape, it would establish a strategic link between Google Cloud and the companies using Wiz’s cybersecurity services.
In a global market where cloud security has become a priority, integrating Wiz could offer Google a significant competitive edge. However, the success of this deal will largely depend on Google’s ability to navigate the current complex regulatory environment and convince regulators of the benefits of this acquisition.
