Alphabet, the parent company of Google, is in advanced negotiations to acquire cybersecurity startup Wiz for $23 billion, according to a source familiar with the discussions, as reported by TechCrunch and previously by The Wall Street Journal.
Acquisition Details
Thomas Kurian, head of Google’s cloud division, initiated talks with Wiz several weeks ago, swiftly progressing to tentative agreement on the purchase price. While the deal faces significant complexities and uncertainties, negotiations are expected to conclude within the next week to 10 days. The source indicated a 50% chance of the deal falling through due to these complexities.
Valuation and Growth
If finalized at $23 billion, the deal would more than double Wiz’s last private valuation of $12 billion achieved in May. Wiz, founded in 2020, has demonstrated exceptional growth, reaching an annual recurring revenue (ARR) of $500 million, with plans to achieve $1 billion ARR next year. This growth trajectory positions Wiz as one of the fastest-growing companies in its sector.
Strategic Implications
Despite Wiz’s original plans to go public in the future, Google Cloud’s potential acquisition offers strong revenue synergies, particularly in expanding Wiz’s customer base within Google’s ecosystem.
Financial Considerations
The $23 billion valuation would represent 46 times Wiz’s current ARR and 23 times its projected 2025 ARR, highlighting Google’s willingness to pay a significant premium compared to industry standards. For instance, Wiz’s competitor Palo Alto Networks trades at just over 14 times its trailing 12-month revenue, underscoring Google’s strategic valuation of Wiz’s potential and rapid growth.
Future Outlook
The acquisition, if completed, would mark a substantial move by Google to strengthen its cloud security offerings and expand its market presence in cybersecurity.
FAQ
What is Wiz’s current annual recurring revenue (ARR)? Wiz has achieved an ARR of $500 million and plans to reach $1 billion ARR next year.
Why is Google interested in acquiring Wiz? Google Cloud sees strong revenue synergies with Wiz, potentially enhancing its cybersecurity capabilities and expanding its customer base.
What are the risks associated with the acquisition deal? The deal faces significant complexities and uncertainties, with a 50% chance, according to the source, of not being finalized due to these factors.
