In a surprising turn of events, Israeli cybersecurity startup Wiz has decided to end its acquisition talks with Google-parent Alphabet, which would have resulted in a $23 billion deal, the largest ever for Google.
This decision was communicated through an internal memo from Wiz CEO Assaf Rappaport, who emphasized the company’s renewed focus on pursuing an initial public offering (IPO) and achieving substantial growth targets, Reuters reported.
“We received a very humbling offer, but with our exceptional team, I am confident that this is the right decision,” Reuters said quoting Rappaport, without specifically naming Google or Alphabet. “Our goal is to achieve an annual recurring revenue of $1 billion, and we believe we can reach this milestone independently.”
Though the acquisition rumors have been doing the round for over a week, neither Google nor Alphabet have commented on this.
“I believe this was a great market validation for Wiz, and while the offer was almost double its valuation it was quite attractive for the investors,” said Neil Shah, VP for research and partner at Counterpart Research.
Earlier reports indicated that Alphabet was in advanced discussions to acquire Wiz for approximately $23 billion, a significant increase from the $12 billion valuation the startup received in May following a $1 billion funding round. This acquisition would have significantly bolstered Google’s cloud computing division, a sector where it currently lags behind competitors like Amazon Web Services and Microsoft Azure.
Wiz offers cloud-based cybersecurity solutions powered by AI and helps companies identify and mitigate critical risks on cloud platforms. It collaborates with several cloud providers, including Microsoft and Amazon, and serves clients ranging from Morgan Stanley to DocuSign. The company has 900 employees distributed across the US, Europe, Asia, and Israel.
The startup’s reported decision to pursue an IPO instead of selling to Google is seen as a strategic move to retain its independence while scaling its operations and revenue.
Rappaport’s memo reflects a strong belief in Wiz’s potential. “We are committed to our growth trajectory and to delivering exceptional value to our customers through innovation and dedication,” Reuters said quoting the Wiz CEO.
The collapse of this deal marks another setback for Alphabet in its recent merger and acquisition endeavors. Just recently, Alphabet backed out of acquiring online marketing software company HubSpot. Had the Wiz deal gone through, it would have been Alphabet’s second major acquisition in the cybersecurity sector.
“With Wiz’s current growth trajectory and potential for growth in the $6 billion per year cloud security market and $200 Billion per year overall cybersecurity market in the next five years also makes it tough to leave money on the table!” added Shah.
Google’s recent acquisitions in the cybersecurity space include Mandiant for $5.4 billion and Siemplify, though these deals pale in comparison to the potential Wiz acquisition.
Despite the challenges, Wiz’s leadership remains optimistic about the future. The company plans to leverage its robust cybersecurity technologies and significant market presence to drive its growth. “Our path forward remains clear, we will continue to innovate and lead in the cybersecurity space,” Reuters said quoting Rappaport. A request for comment from Google and Wiz remained unanswered.