Alphabet, Google’s parent company, is in advanced talks to acquire cybersecurity giant Wiz for $23 billion, the Wall Street Journal reported on Sunday. TechCrunch’s sources have heard the same and added that sales talks could last into next week.
If this deal ends up going through, it will be Alphabet’s biggest acquisition yet. It could also be a big exit for startups at that time,M&Aa After all, it can affect businesses and startups in a number of ways, some very obvious and others less so.
Angela Lee, a professor at Columbia Business School and founder of the angel investment community 37 Angels, told TechCrunch that if Alphabet were to acquire Wiz, she thinks it would be enough to give the M&A market a boost. said.
“The size of the buyout is huge – the market is very ripe for an exit of this size,” Lee said. “There is this fear that no one wants to be the first to stick their neck out. My hope is that this will revive the M&A market. “
The market needs that push. In H1 of 2024, there were 356 startup deals in the US, according to PitchBook data. This means that 2024 is not on track to deliver more deals than 2023, when there were 771. But there is a catch: Lee said if this happens, and it starts to stimulate M&A startups, future deals are likely to prevail. it doesn’t have much impact on the current financial crisis that the big startups of today are facing.
“I don’t know how many companies can buy this much,” Lee said of Alphabet’s balance sheet. “This will not convert IPOs to M&A. This deal is the only thing Google can do.”
I’ve reached out to Wiz and Google for comment and will update this story when I hear back.
Gaining leverage
A deal can also have a positive effect on business fundraising. Fundraising at the US venture capital firm is currently on track to end the year below its 2023 total of $81.5 billion, which was down 57.4% from 2022’s $191.3 billion, according to PitchBook data.
Brian Borton, VC and growth partner at StepStone, reminded me last month that VC funds have held company grants longer than any other asset class — and regardless of the circumstances of now in the market. LPs don’t always like this power, and combined with the current lack of exits, LPs are reluctant to invest in the current environment. But they still want exposure to the business. Borton says this is a strong reason why StepStone was able to raise its latest fund, because their strategy allows LPs to enter the business without a long holding period.
Lee said this deal happening could ease the doubts of some LPs, not only because of the size, but because Wiz is only 4 years old. The latest startup in America is more than 12 years old on average, according to PitchBook data. Lee says that this deal will not only directly affect the numbers, but also give VCs the necessary leverage in the fundraising process. He added that if he tried to raise money now, he would spend it.
“This will make the exit times go down, not in number, but in quantity,” Lee said. “That would encourage LPs to return to the market. When people talk about the recovery and how things in 2024 look better than 2022 and 2023, what hasn’t come back is the VC fundraising. This can I was the little pressure needed for this to happen again.”
Driving deals
If Wiz is found, Lee thinks it could get VCs writing checks again. DocSend found that airport activity from investors and founders has increased by two percent in Q2 2024 compared to the same period last year – although there is not much movement though and thus real deals are closed. Justin Izzo, chief data and trends researcher at DocSend, told me that he doesn’t think the market opening will have an impact on these early transactions — lower interest rates will. a big difference – as they are very far from the timetable of the departure from the start.
Izzo and I didn’t talk directly about Wiz, but Lee and I agree that with Wiz being such a small company, it would have a different effect if this purchase were to touch the old player. An 11-year-old startup may not move the needle for seed-stage companies, but Lee said the 4-year-old company exploded just as quickly, and exited in droves. yes, it can.
“We all have FOMO,” Lee said. “Wouldn’t we all like to be part of this alliance? It’s nice to see more people talking about something that isn’t AI. ”
The future of the agreement is unclear. It could face an antitrust push. It may not happen at all. But if it does, it might be what the stock market needs to start seeing some movement.
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