Google seemed set to acquire the cybersecurity start-up Wiz for $23 billion, a move that would have marked its largest acquisition ever. However, on Monday night, Wiz informed its employees that it had decided to turn down the offer and instead pursue a public listing on a stock exchange, according to NY Times.
Wiz’s chief executive, Assaf Rappaport, reiterated the company’s aim of generating $1 billion in recurring revenue ahead of an initial public offering (IPO) in the memo. He expressed confidence in the company’s decision to continue its independent growth trajectory despite the substantial offer from Google.
Had the acquisition gone through, it would have provided significant momentum to Google’s cloud-computing division and strengthened its position against Microsoft in the cybersecurity space. Wiz has become an essential tool for many businesses seeking to protect their cloud applications.
Google has never spent such a large amount to acquire another company, especially a relatively young start-up like Wiz. Its previous largest deal was the $12.5 billion purchase of Motorola Mobility in 2012, which it sold at a loss a few years later.
This potential acquisition faced substantial regulatory challenges. Google has had a contentious relationship with U.S. regulators, with the Justice Department suing it in two separate antitrust cases targeting its market power. One case is focused on Google’s dominant search engine, and the other aims to dismantle its digital advertising-technology business.
Under President Biden, regulators have adopted a stringent stance against corporate consolidation. The Federal Trade Commission unsuccessfully attempted to block Microsoft’s acquisition of the video game company Activision, and Amazon abandoned its $1.7 billion acquisition of iRobot following resistance from both American and European regulators.
A government review of a multibillion-dollar acquisition could take over a year and potentially hinder a company’s momentum. This delay could be particularly detrimental for Wiz, which has consistently highlighted its rapid growth.
Rappaport’s memo indicated that the attention the company received following news of a possible Google acquisition had reinforced his commitment to continue building the platform independently.
Wiz’s decision to reject Google’s offer and pursue an IPO reflects the start-up’s confidence in its growth potential and market position. By opting for an independent path, Wiz aims to maintain its fast-paced development and capitalize on its increasing market validation. This move also positions Wiz to continue innovating and expanding its platform to meet the evolving needs of cybersecurity and cloud application protection.
The decision also highlights the challenges tech giants like Google face in acquiring high-growth start-ups in the current regulatory environment. With increasing scrutiny from regulators and a heightened focus on antitrust issues, major acquisitions are becoming more complex and time-consuming. This environment may encourage more start-ups to consider public listings as a viable alternative to acquisition, allowing them to retain control and continue their growth trajectories independently.
Wiz’s choice to decline Google’s acquisition offer and focus on an IPO underscores the company’s robust market position and growth prospects. It also reflects broader trends in the tech industry, where regulatory hurdles are prompting start-ups to seek public listings as a means to achieve their long-term goals while maintaining their independence. As Wiz moves forward, it will be closely watched as a potential leader in the cybersecurity sector, driving innovation and growth in the industry.
