If at first you don’t succeed, buy, buy again.
These (altered) words of wisdom come to you courtesy of Google parent Alphabet (GOOGL) after the search-engine and cloud-services giant definitively agreed to acquire cloud-security startup Wiz for $32 billion cash.
“This acquisition represents an investment by Google Cloud to accelerate two large and growing trends in the AI era: improved cloud security and the ability to use multiple clouds (multicloud),” Google said of the company’s largest deal.
This wasn’t the first time Google went off to see the Wiz. Last year the New York company skipped out on a potential $23 billion acquisition by Google and told employees that it would pursue an IPO instead.
However, 2022 and 2023 saw the weakest IPO market since the global financial crisis, EY said in a January study, due to recession fears, falling valuations and increasing interest rates.
Alphabet CEO Sundar Pichai just executed the company’s biggest acquisition.
Analyst calls deal a robust strategic move
EY said that the M&A environment is expected to become more accommodative under the Trump administration, and as a result “companies should be able to scale quicker ahead of a public listing, and the ability to use public stock as acquisition currency becomes more attractive.”
Google donated $1 million to Trump’s inauguration fund, and Sundar Pichai, CEO of Alphabet, was among the big tech executives who attended the event.
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The company has butted heads with the U.S. Department of Justice, which has filed several cases against Alphabet, including one last year when a federal judge ruled that Google held a monopoly in the search market.
The DoJ recently revised its proposed remedies in its antitrust case against Alphabet.
And the EU just hit Alphabet with antitrust charges.
Alphabet shares are down nearly 14% year to date, but up about 11% from a year ago.
Investment firms issued research reports following news of the acquisition, including Canaccord analyst Maria Ripps, who called the deal a robust strategic move.
Integrating Wiz should enable Google to offer more complete security offerings to customers, she told investors, and with its unique cloud-native capabilities, it should enable Google to capture growth across the cloud-security market.
Ripps reiterated a buy rating and $225 price target on Alphabet shares.
Jefferies said a deal of this size “emphasizes the mission criticality” of cybersecurity and should support valuations broadly.
In the near term, however, the deal could pressure cloud vendors such as Palo Alto Networks (PANW) , SentinelOne (S) and CrowdStrike (CRWD) as Google uses its scale to push pricing and penetrate the market, the investment firm said.
Fund manager sees wave of M&A activity
Jefferies said it saw no changes to cloud-delivered cybersecurity platform provider Check Point’s (CHKP) partnership with Wiz, which was announced last month.
Long term, Jefferies said, the deal should benefit pure-play vendors as “the Switzerland effect is appreciated by customers who may not trust” Google to guard Amazon’s (AMZN) AWS and Microsoft’s (MSFT) Azure.
Related: Justice Department bold move might have ripple effect on Google future
Chris Versace noted that, as he suspected, the rationale for the transaction is for Wiz to augment Google Cloud’s security offering in an effort to alter the current playing field with AWS, Azure and others.
“Helping with that, Wiz is a platform trusted by more than 50% of Fortune 100 companies who already use its products and services,” the veteran fund manager said in his TheStreet Pro column, including customers like Agoda, Avery Dennison, BMW, Cushman & Wakefield, DocuSign, Mars, Plaid, Priceline, Salesforce and Slack.
Versace, lead portfolio manager for TheStreet Pro Portfolio, said that until the deal closes in 2026, Wiz will remain an independent company, continuing to work with all major clouds.
After that Wiz will be folded into Google Cloud, he added, but it is expected to maintain full support as a multicloud solution, meaning it will continue to work with other cloud-services providers.
“Generally speaking, a transaction like the Google-Wiz one tends to drive a wave of musical chairs M&A activity as companies look to shore up their capabilities as the playing field changes,” Versace said.
“With the Google-Wiz transaction ranking among the larger if not being the largest M&A deal announced this year, it’s another reason to think M&A activity could expand in the coming weeks,” he added.
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