What just happened? Enterprise companies are increasingly demanding advanced security features from their cloud providers, and companies like Amazon Web Services and Microsoft Azure are delivering. To stay competitive, Google sought to acquire Israeli cybersecurity startup Wiz for an eyebrow-raising $23 billion. But Wiz has ended the discussions, and now Google must consider the available alternatives.
Google’s $23 billion attempt to acquire Israeli startup Wiz would have been its largest deal ever, positioning Mountain View as a major force in cybersecurity, particularly cloud security. However, the discussions were terminated. Wiz has ended discussions with Google parent Alphabet and will pursue an initial public offering instead, with plans to grow the business to generate $1 billion in annual revenues – an attainable goal following the startup’s $1 billion funding round that valued it at $12 billion.
It should be noted that neither Alphabet nor Wiz have officially acknowledged the acquisition talks nor their closure. Wiz’s plans were disclosed by CEO Assaf Rappaport in a memo to employees that was seen by the media.
The end of the discussions, which had reportedly reached the advanced stage, is a setback for Google, which has been investing heavily in its cloud infrastructure and security. In March 2022, Alphabet acquired cybersecurity firm Mandiant for $5.4 billion, a company known for its threat intelligence expertise and custom intelligence services for clients. The Wiz acquisition was set to build on these credentials.
However, the deal faced significant scrutiny from antitrust authorities, which likely contributed to the decision to terminate the talks. The regulatory environment for tech giants like Alphabet in particular has become increasingly stringent – massive deals like the Wiz purchase are rarely approved without substantial concessions.
Some analysts also wondered about the $23 billion price tag for Wiz, given its recent $12 billion valuation, and were concerned about overpaying for the company. However, Google likely thought the premium reflected Wiz’s strategic value, and that the long-term benefits of enhanced security capabilities would justify the investment.
So, what is Google’s next move after this let down? Simply put, the company will have to find alternative ways to enhance its cybersecurity capabilities if it wants to remain competitive. Google may increasingly find itself at a disadvantage in attracting enterprise customers who prioritize robust cloud security solutions and have competitors like Amazon Web Services and Microsoft Azure to consider.
Google may now shift its focus towards developing its own cloud security solutions or expanding existing capabilities internally. The company is certainly not without resources for this, nor would it be starting from scratch for such an endeavor. It could also try for another acquisition, although it would be difficult to find a company with Wiz’s advantages.
