Google parent company Alphabet in advanced talks to acquire cybersecurity startup Wiz for around $23 billion, according to people familiar with the matter. This would be the tech giant's largest acquisition to date.
An agreement could be reached soon, provided the negotiations do not fail, according to insiders.
Alphabet is planning this deal at a time of intense antitrust scrutiny of the search engine company and other technology giants. The acquisition could also bolster Alphabet's efforts in the cloud computing sector, an important and growing business area where the company lags behind its competitors.
The valuation of Wiz has increased significantly since its founding in 2020 by CEO Assaf Rappaport and several colleagues. The company, which offers cybersecurity software for cloud computing, raised one billion US dollars earlier this year at a valuation of 12 billion US dollars. It is one of the few startups outside of artificial intelligence to have received funding at a higher valuation in 2024.
Most startups are still suffering from the aftermath of the technology boom that peaked at the beginning of this decade, when a low-interest-rate environment promoted inflated valuations that far exceeded business growth.
Wiz announced achieving $100 million in annual recurring revenue after 18 months and reaching $350 million in 2023. The company is backed by prominent Silicon Valley venture capitalists such as Sequoia Capital, Andreessen Horowitz, Index Ventures, and Lightspeed Venture Partners.
If the Google deal goes through, this would be a rare exit for these investors at a time when the market for initial public offerings has stalled and the antitrust environment has prompted startups to avoid mergers and acquisitions.
The founders of Wiz started the company after selling their first startup, Adallom, to Microsoft for $320 million in 2015. They worked for the tech giant for several years before founding Wiz.
Wiz is headquartered in New York and has additional offices in the USA and Israel. The startup collaborates with some of the largest cloud companies, including Amazon, Microsoft, and Google.
Despite a market value of over 2 trillion US dollars, Google has been a relatively conservative buyer in recent years compared to some of its major tech competitors. The company has avoided large acquisitions such as Microsoft's 26 billion dollar purchase of LinkedIn or the 75 billion dollar acquisition of Activision Blizzard.
An acquisition of Wiz would significantly surpass Google's largest acquisition to date, the $12.5 billion purchase of Motorola Mobility in 2012. Google also spent $2.1 billion on Fitbit in 2021—a deal that faced regulatory hurdles after the announcement—and $3.2 billion on Nest Labs in 2014. Other acquisitions over the years include YouTube, DoubleClick, Looker, and Waze.
Google is working on expanding its cybersecurity business in the cloud sector. The largest recent acquisition – and the second-largest of all time – is the nearly $5.4 billion purchase of the security company Mandiant two years ago.
Currently, Google is awaiting a verdict in an antitrust trial by the Department of Justice due to allegations that the company used illegal means to consolidate its dominance in internet search. Last year, the agency filed a second antitrust lawsuit, which has not yet been litigated, alleging unfair practices in Google's advertising business.
In the cloud computing market, however, Google is not nearly as strong as it is in search and online advertising. The company is far behind Amazon and Microsoft but is investing heavily in the business, which is growing rapidly. Last year, Google’s cloud revenue grew by 26% and the company achieved an operating profit for the first time.
If the deal for Wiz goes through, it would be one of the largest technology transactions in recent times, as antitrust scrutiny and high interest rates are deterring potential buyers. Where there have been deals, cybersecurity has been a focus. Cisco completed the acquisition of cybersecurity and analytics company Splunk for $28 billion earlier this year.
