Israeli cybersecurity startup Wiz has terminated negotiations with Alphabet, Google's parent company, regarding a potential $23 billion acquisition, according to a memo seen by CNN. This move, which would have marked Google's largest acquisition, has been shelved as Wiz pivots towards an initial public offering (IPO) and aims to generate $1 billion in annual revenue.
In an internal memo to employees, Wiz CEO Assaf Rappaport acknowledged the intensity and speculation surrounding the potential deal but emphasized the company's commitment to independence and growth. "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 stated. He added, "Saying no to such humbling offers is tough, but with our exceptional team, I feel confident in making that choice."
Neither Alphabet nor Wiz had officially confirmed the acquisition discussions. However, earlier reports from CNN indicated that Alphabet was in advanced talks to acquire Wiz, a deal that would have valued the cybersecurity firm at approximately $23 billion. These discussions reportedly followed a significant funding round in which Wiz raised $1 billion from venture capital investors, bringing its valuation to $12 billion.
Wiz, which provides cloud-based cybersecurity solutions designed to help companies identify and mitigate critical risks on cloud platforms, has rapidly become a notable player in the cybersecurity space. The company's decision to reject Google's offer underscores its confidence in its growth trajectory and market potential. "Our focus now is on achieving $1 billion in annual recurring revenue alongside pursuing an IPO," Rappaport noted in the memo.
The decision to call off the deal represents a setback for Google, which has been actively investing in its cloud infrastructure and seeking to enhance its cybersecurity capabilities. Last year, Google's cloud business generated over $33 billion in revenue, and acquiring Wiz could have bolstered its competitive position against industry giants like Microsoft and Amazon.
This development marks the second recent disappointment for Alphabet in its merger and acquisition efforts. The company had reportedly walked away from a deal to acquire online marketing software company HubSpot. Alphabet's pursuit of Wiz followed its $5.4 billion acquisition of cybersecurity firm Mandiant in March 2022, part of its broader strategy to help companies better address cyber threats and strengthen its cloud computing business.
Antitrust concerns and regulatory scrutiny have increasingly targeted Big Tech's acquisition activities, potentially influencing Wiz's decision to reject Google's offer. The Justice Department has ongoing antitrust lawsuits against Google concerning its search engine and digital advertising businesses. CNBC reported that antitrust and investor concerns were factors in Wiz's decision to abandon the acquisition talks.
Wiz's choice to pursue an IPO and maintain its independence highlights a growing trend among tech startups favoring public listings over acquisitions by larger tech companies. This strategy allows companies to retain control and capitalize on their market potential. As Wiz gears up for its IPO, it aims to join the ranks of successful tech firms that have leveraged public markets to fuel their growth and innovation.
Wiz's cloud-based security solutions have made it an attractive acquisition target, but its leadership believes in the company's ability to thrive independently. By focusing on achieving significant revenue milestones and preparing for an IPO, Wiz aims to solidify its position in the competitive cybersecurity landscape.
In the memo, Rappaport expressed confidence in the company's direction and its potential to continue making a significant impact in the cybersecurity field. "With our exceptional team and innovative solutions, we are well-positioned to achieve our goals and deliver value to our customers and stakeholders," he said.
