In what many venture investors have described as a sluggish M&A market, this week brings about what would be the largest acquisition of a private, venture-backed company ever — if it goes through.
The planned $32 billion acquisition of cloud security unicorn Wiz by Google parent Alphabet doesn’t come as a shock to many who watch cybersecurity closely. It was just last summer when news broke Alphabet was close to acquiring Wiz for approximately $23 billion, as first reported in The Wall Street Journal.
The reasoning for the deal now is roughly the same — Google is tired of being stuck in third place when it comes to cloud services — behind AWS and Microsoft’s Azure — and Wiz’s software helps companies secure their cloud applications by identifying and prioritizing threats, which could mean possible higher security revenue for the search giant.
As always these days, there’s also an artificial intelligence angle, as Wiz’s offerings also would help keep enterprise systems clean in the advent of AI.
Getting it done
However, reports last summer indicated the deal fell through because of Wiz’s intent to stay independent, as well as concerns about possible regulatory challenges in a dealmaking environment that many saw as unfriendly.
However, all of that comes with some important caveats. While the change in administration could bring less regulation to the market, there is still concern about how friendly the new administration — and the economy it creates — will be to both tech and M&A.
While most believe the election of President Donald Trump will change that environment, that remains to be seen.
The new head of the Justice Department’s antitrust efforts, Gail Slater, is a frequent critic of large technology companies — and Google certainly falls into that category.
Google also is dealing with its own regulatory issues, as just last year a federal judge ruled Google illegally maintained a monopoly in search and advertising markets and the Big Tech giant is facing the possibility of being broken up.
Cyber M&A
None of that means the deal won’t go through, just to point out it’s a far from certain thing (we all remember Adobe’s ill-fated $20 billion plan to buy design platform Figma).
If it does go through, it could be a boon for cyber dealmaking. The largest deal so far the industry has witnessed involving a VC-backed company was Okta’s $6.5 billion stock deal for Bellevue, Washington-based Auth0 way back in 2021.
After a down 2023, which saw only 71 M&A deals involving VC-backed cyber firms, last year saw a big uptick to 119, per Crunchbase data.
This year may well top that, as so far there have been 33 such deals.
Winners
The proposed purchase price also would suggest many VC firms would be happy to see this deal go through. It was just last May when Wiz locked up a $1 billion round at a $12 billion valuation.
That round was co-led by Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital, with participation from Greylock, Wellington Management and existing investors Cyberstarts, Greenoaks, Howard Schultz, Index Ventures, Salesforce Ventures 1 and Sequoia Capital.
All of those firms seemingly would make a nice profit after watching Wiz’s value jump 167% in less than a year — as would those who invested in earlier rounds.
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Illustration: Dom Guzman
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