Google’s $23 billion acquisition of Wiz falls through, Israeli cybersecurity firm to go for IPO

Google parent Alphabet’s ambitious plans to acquire Israeli cybersecurity firm Wiz for $23 billion have fallen through, marking a significant setback in its quest to bolster the search engine’s cloud-computing division with advanced security capabilities.

The termination of talks reportedly highlights the challenges tech giants face in navigating regulatory landscapes and investor expectations.

The acquisition would not only have been the largest in Google’s history but also the largest purchase of a venture-backed company, according to data from PitchBook.

Despite initial optimism, regulatory hurdles loomed large over the negotiations, with some members of both Alphabet and Wiz boards reportedly expressing doubts about obtaining necessary approvals.

Wiz Chooses independence and IPO route

In an email sent by Wiz CEO Assaf Rappaport to his 1,200 employees, he said:

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 building Wiz.

Rappaport said the company’s next milestone was $1 billion in ARR and an IPO. 

Saying no to such humbling offers is tough, but with our exceptional team, I feel confident in making that choice.

Founded by alumni of Israel’s elite cyber intelligence unit, Wiz has quickly made a name for itself in the cybersecurity sector, attracting significant venture capital backing from firms like Sequoia Capital and Thrive Capital. 

It was valued at $12 billion in its last funding round and its decision to pursue an IPO underscores Wiz’s confidence in its ability to thrive as a publicly traded entity, despite the allure of a substantial acquisition by Google.

Regulatory and Investor Concerns

Antitrust concerns, amplified by recent regulatory actions against tech mergers, significantly influenced the outcome of the acquisition talks.

The Federal Trade Commission (FTC) and other regulatory bodies have increasingly scrutinized large tech acquisitions, citing potential monopolistic practices and consumer welfare concerns.

Regulatory scrutiny has intensified following high-profile cases such as the FTC’s attempts to block Microsoft’s acquisition of Activision Blizzard and Amazon’s abandonment of its iRobot acquisition.

Even when the deal was in the works, analysts had apprehended it would face regulatory challenges. 

Pareekh Jain, CEO and lead analyst at Pareekh Consulting had pointed out that that the acquisition might face regulatory challenges as Wiz is also a partner of other cloud providers including AWS and Oracle. 

“Google will have to assure regulators that it will create a level playing field so that customers can use Wiz independently also with different cloud providers other than GCP,” Jain had said.

Some watchers link the development to the IT outage 

Some market watchers and experts are speculating that the deal falling through could be attributed to the attention that cybersecurity has garnered post the IT outage which brought Crowdstrike under the spotlight. 

Amit Kukreja, market watcher said that Google was going to pay Wiz around 50 times its ARR. 

Given the Crowdstrike IT outage, the cybersecurity market is growing and could be more valuable than the $23 billion as a public company, he wrote on ‘X’.

Maybe they could take more market share from Crowdstrike (or already have in the past few days with customers looking for other options) and are going to continue to massively grow, therefore going public makes more sense.

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