Google acquires cloud security startup Wiz for $32 billion in largest deal yet
Google has officially confirmed its acquisition of cybersecurity startup Wiz for $32 billion. This all-cash transaction marks the largest acquisition in Google's history and eclipses the previous record for a cybersecurity acquisition, set by Cisco's $28 billion purchase of Splunk in 2024. This is Google’s second attempt to purchase the Israeli-founded company after the first deal, which was valued at $23 billion, fell through.
Why Wiz?
Wiz has been on an upward trajectory since its inception in 2020 claiming the title of the fastest startup ever to scale from $1 million to $100 million in annual recurring revenue (ARR). By February 2024, Wiz reported reaching $350 million in ARR and is projected to achieve an estimated $1 billion in revenue this year.
Its clientele includes businesses that primarily rely on Amazon Web Services (AWS) and Microsoft Azure rather than Google Cloud. By acquiring Wiz, Google not only strengthens its cloud security capabilities but also gains access to a broader customer base outside of its own ecosystem.
Strategic implications
Revenue Growth: Wiz’s strong ARR adds immediate financial value to Google Cloud.
Customer Expansion: Many Wiz customers operate on competing cloud platforms, offering Google a strategic entry point into AWS and Azure users.
Security Prioritization: The deal highlights Google’s recognition of cybersecurity as a critical component of its cloud and AI ambitions.
The high-stakes negotiation
The initial deal fell apart due to various concerns, including potential antitrust scrutiny. However, Google’s renewed offer included a $3.2 billion reverse breakup fee, indicating strong confidence in the deal’s approval. This fee, payable to Wiz if the acquisition fails, likely influenced Wiz’s decision to accept the final offer.
Some have questioned why Google didn’t invest in developing its own cybersecurity arm instead of acquiring Wiz. The answer lies in Wiz’s industry-leading technology and established market presence, which would be difficult and time-consuming to replicate.
The big winners
The deal has generated massive returns for early investors. Sequoia Capital stands to make $3 billion, a 25x return on its investment. Cyberstarts, an Israel-based investment firm, saw an extraordinary 222x return, turning a $6.4 million investment into $1.3 billion.
Also included as part of the package is a $1.5 billion retention bonus for the 1,800 Wiz employees. Google has not specified how long employees must stay to receive their retention bonuses, but the period typically ranges between three to four years.
As is standard with acquisitions of this magnitude, the deal is subject to customary closing conditions, including scrutiny and approval from regulatory bodies
