Could Google’s $23B Wiz Deal Fuel M&A Boom, Refresh Israel Controversy?

Google parent Alphabet’s reported $23 billion bid for cybersecurity cloud software firm Wiz would be company’s largest ever acquisition, and could shake up things for the mergers and acquisitions landscape, which saw a sluggish tech market in 2023.

But a deal could spark could also spark fresh protests that saw workers fired over the company’s contracts with the Israeli government amid the Gaza War. Wiz was founded in Israel and now has headquarters in New York -- most of its engineering workforce still works out of Tel Aviv. With a global headcount of about 900 (150 working in Israel), Wiz said it plans to add another 400 people this year, according to a February report from The Times of Israel.

The potential M&A boon, which The Wall Street Journal first reported on Sunday citing unnamed sources, could signal tech companies are moving ahead with deals despite stubbornly high interest rates and an overall lull in the tech sector. Wiz’s prospects have skyrocketed since the company’s founding in 2020, racking up $350 million in annual recurring revenue (ARR) in 2023.

Citing anonymous sources, Reuters reported the deal would be funded mostly by cash. Google’s first quarter 2024 revenue amounted to more than $79.9 billion, an increase from the same period in 2023 of more than $10.5 billion, according to the company’s most recent financial reports. Google also reported it had $108.09 billion cash on hand. According to The New York Times, Google Cloud CEO Thomas Kurian instigated the Wiz acquisition.

Related:Google Caves to EU Antitrust Pressure, Changes Data Practices

M&A Play Could Reshape Google Cloud Strategy

In an interview with InformationWeek, Chris Pierson, CEO of executive cybersecurity firm BlackCloak, says Google’s play may signal a new strategy for tech M&A deals. Instead of focusing on buying distressed companies or smaller intellectual property advances, Google is looking at a deal that could reshape the company.

“This is a move on behalf of Google that is going to really, really solidify them as a cloud powerhouse for decades,” Pierson says. “It’s extremely smart and extremely well-timed. And it shows that the market is absolutely open and that deals are happening. This is a good sign for the overall cybersecurity economy.”

Chris Stafford, an M&A expert at business and technology consultancy West Monroe, says the deal is the company’s biggest move yet in the cloud cybersecurity space. “They clearly have a big appetite,” he tells InformationWeek in an interview. The $23 billion price tag is almost twice the company’s valuation just months ago, after it raised $1 billion in venture capital on a $12 billion valuation.

Related:Tech M&A Value Nosedives 55% in 2023: Report

Of course, any deal would depend on stiffening anti-trust regulatory approvals globally -- and Google is already embroiled in a pair of US Justice Department anti-trust lawsuits. The EU has taken a strong anti-trust stance as it looks to solidify its position as global tech regulation leader and has shown a willingness to take on Big Tech companies.

But BlackCloak’s Pierson believes that Wiz’s unique position could create a business that does not attract anti-trust regulatory heat. “Wiz has attacked a very, very finite and deep-seated technology that can advance a certain aspect of the overall Google Cloud platform,” Pierson says. “I think it’s really category defining and will set itself apart from other deals that have seen more regulatory attention.”

Potential for Controversy Over Israel Connection

In April, some Google workers held sit-in protests at its offices in New York and California over the company’s involvement in the $1.2 billion “Project Nimbus,” a 2021 contract that -- along with Amazon -- would provide Israel’s government with cloud computing and artificial intelligence services.

To break up the sit-in, Google called police and protesters were arrested. The arrests resulted in the firing of more than 50 employees, according to No Tech For Apartheid, the group that organized the protest.

Related:5 Big Cloud Security Deals Shaping the Industry in 2023

Wiz still has strong ties to Israel. Its four founders -- Assaf Rappaport (current CEO), Ami Luttwak, Yinon Costica, and Roy Reznik -- served together in the Israel Defense Force's elite Unit 8200 intelligence team before founding Wiz. Each founder stands to gain $2.3 billion if the valuation holds, according to a report from Haaretz.

According to Israeli business news site Globes, the country stands to gain at least $2.5 billion from the acquisition through taxes. The founders' proceeds will be taxed, as well as other Israeli shareholders.

In a post on X (formerly Twitter), Rep. Ritchie Torres, D-N.Y., said the acquisition would be a vote of confidence in Israel. “It is a $23 billion middle finger to the BDS [Boycott, Divestment and Sanction] movement against the Jewish state,” he wrote.

Google's Stance on Protest Activity

Google and Alphabet CEO Sundar Pichai in a blog post in April said the company will put its mission above politics. “We have a culture of vibrant, open discussion … But ultimately, we are a workplace and our policies and expectations are clear: This is a business, and not a place to act in a way that disrupts coworkers or makes them feel unsafe, to attempt to use the company as a personal platform, or to fight over disruptive issues or debate politics.”

No Tech For Apartheid in a press release accused Google of trying to strongarm its employees and stifle free speech. “Google’s aims are clear: The corporation is attempting to quash dissent, silence its workers, and reassert its power over them,” a spokesperson said.

InformationWeek has reached out to Google and Wiz for comments on the potential acquisition and will update with any response.

InformationWeek has also reached out to No Tech For Apartheid, which aims its efforts at compelling companies to divest from Israeli interests over the Gaza War, and will update.