Item 1 of 3 The logo of Google is seen outside Google Bay View facilities during the Made by Google event in Mountain View, California, U.S. August 13, 2024. REUTERS/Manuel Orbegozo/File Photo
[1/3]The logo of Google is seen outside Google Bay View facilities during the Made by Google event in Mountain View, California, U.S. August 13, 2024. REUTERS/Manuel Orbegozo/File Photo Purchase Licensing Rights
NEW YORK, March 18 (Reuters) – Less than a year after Google’s plans to acquire Israeli cybersecurity firm Wiz fell apart, executives were able to ink a deal in a flurry of negotiations after U.S. President Donald Trump was sworn into office just eight weeks ago.
Google (GOOGL.O)
, opens new tab sweetened its original offer for $23 billion in July to $32 billion, making it one of the largest tech deals ever, and dramatically upped the breakup fee to more than $3.2 billion, people familiar with the agreement said. But the real closer for Wiz and Google executives was the change at the White House that brought with it the prospect of a friendlier antitrust review under Trump, these people said.
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Google made another pass last fall while Wiz considered a potential IPO, these people said. While negotiations continued sporadically over several months, executives started meeting regularly to hammer out details of a deal after Trump’s Jan. 20 inauguration and appointment of key antitrust officials in his administration, these people said.
Fazal Merchant also joined Wiz as its new Chief Financial Officer in January, while the company was still weighing a potential initial public offering. Merchant played a major role in shaping the deal, along with CEO Assaf Rappaport, helping to get it across the finish line, one of the people said. Google’s cloud chief Thomas Kurian was also a key architect of the agreement, two people said.
SWEETENED DEAL
Wiz executives found it hard to turn down Google’s revised offer, which valued the cybersecurity startup 39% higher than the earlier bid, and also included a higher reverse breakup fee of more than $3.2 billion, or over 10% of the deal value, payable to Wiz if the deal falls through, the sources said.
Google sees the premium as justified given Wiz’s 70% annual revenue growth and over $700 million in annualized revenue, according to a source familiar with the discussions.
Reverse termination fees, more commonly referred to as breakup fees, are paid by buyers to compensate target companies when deals fall apart due to regulatory reasons.
Such a high breakup fee is not common in corporate dealmaking in the United States, even though such fees have been on the rise in recent years as regulatory threats to large deals have increased globally. According to a study by law firm Fenwick & West, which reviewed deals worth at least $1 billion that were signed in 2023, breakup fees on an average ranged between 4% and 7% of the overall transaction value.
It is not clear if Google and Wiz approached U.S. antitrust authorities prior to the signing of the deal.
Some companies have preemptively briefed U.S. antitrust watchdogs to warm them up before signing a deal. For instance, in 2023, Tempur Sealy sought the blessing of the U.S. Federal Trade Commission before signing a $4 billion deal to acquire Mattress Firm.
Wiz executives were wary after seeing Adobe’s (ADBE.O)
, opens new tab attempted $20 billion takeover of Figma fall apart due to antitrust scrutiny in late 2023, two people said. Google is also currently battling two U.S. Department of Justice lawsuits over its domination of online search and another about ad technology.
Google had offered to pay Wiz a breakup fee of about $2 billion at the time – a sum that Wiz felt was not high enough for them to undertake the risk of signing the deal, the sources said.
Some of Wiz’s largest venture-capital backers were worried that then-Federal Trade Commission Chair Lina Khan would tank the deal, the sources said.
Trump’s appointment of Andrew Ferguson to chair the FTC and Gail Slater to helm antitrust reviews at Justice also gave executives at both companies more confidence in a smoother regulatory review, people familiar with the deal said.
Google, Wiz, the White House, and Justice officials did not immediately respond to requests for comment.
Bank of America advised Google on the deal, while Goldman Sachs advised Wiz.
Additional reporting by Jody Godoy in New York and Steven Scheer in Tel Aviv. Editing by Dawn Kopecki.
Our Standards: The Thomson Reuters Trust Principles.
Anirban Sen is the Editor in Charge for U.S. M&A at Reuters in New York, where he leads the coverage of the biggest deals. After starting with Reuters in Bangalore in 2009, Anirban left in 2013 to work as a technology deals reporter in several leading business news outlets in India, including The Economic Times and Mint. Anirban rejoined Reuters in 2019 as Editor in Charge, Finance to lead a team of reporters, covering everything from investment banking to venture capital. Anirban holds a history degree from Jadavpur University and a post-graduate diploma in journalism from the Indian Institute of Journalism & New Media.
Krystal reports on venture capital and startups for Reuters. She covers Silicon Valley and beyond through the lens of money and characters, with a focus on growth-stage startups, tech investments and AI. She has previously covered M&A for Reuters, breaking stories on Trump’s SPAC and Elon Musk’s Twitter financing. Previously, she reported on Amazon for Yahoo Finance, and her investigation of the company’s retail practice was cited by lawmakers in Congress. Krystal started a career in journalism by writing about tech and politics in China. She has a master’s degree from New York University, and enjoys a scoop of Matcha ice cream as much as getting a scoop at work.
