What is the $32 billion-acquisition deal between Google and Wiz?

Wiz had rejected a $23 billion bid from Google in July 2024, amid antitrust concerns and regulatory challenges in the US. Instead, the company’s co-founders had decided that Wiz would remain independent and pursue an IPO.

The resurrected deal is expected to be finalised by 2026 subject to regulatory approvals and customary closing conditions.

Why does the acquisition matter?

Google’s acquisition of Wiz comes amid fierce competition in the cloud services market fuelled by the generative AI boom. Major cloud service providers such as Amazon Web Services (AWS) and Microsoft Azure are vying to be the top choice for hosting large language models (LLMs) and other generative AI services.

With an estimated market share of 15 per cent, Google Cloud Platform trails behind AWS and Azure in terms of growth. However, the company is likely to be betting on Wiz’s next-generation cloud security features to strengthen its standing in the sector.

What does Wiz sell?

In 2015, Assaf Rappaport, Ami Luttwak, and Roy Reznik sold their first cybersecurity startup called Adallom, to Microsoft for $320 million. Five years later, the trio founded another cybersecurity startup, Wiz, out of Tel Aviv, Israel.

After just 18 months, Wiz reported an annual recurring revenue of $100 million. In May last year, the startup was valued at $12 billion after raising $1 billion in a funding round led by Andreessen Horowitz, Lightspeed Venture Partners, and Thrive Capital.

The startup’s largest outside investor is Index Ventures, with additional backers including Sequoia Capital, Insight Partners and Cyberstarts, according to a report by CNBC.

Wiz offers enterprises a range of cloud security solutions capable of actively preventing, detecting and responding to cyber threats. These solutions can be implemented by businesses across multi-cloud environments to address critical vulnerabilities.

Demand for the company’s security products has increased as generative AI has led to more sophisticated cyber attacks.

Wiz’s previous clientele includes major cloud service providers such as AWS, Google, Azure, Oracle, and others. The cybersecurity firm also has a presence in India with nearly 116 employees out of its 2,500-strong workforce located in the country. Wiz appointed Anil Bhasin as its area vice president for India and SAARC in January this year.

Why is Google keen on acquiring Wiz?

Google has said that Wiz’s multi-cloud strategy will remain intact post-acquisition. This means that the company’s security products will continue to work and be available across all major clouds including AWS, Azure, and Oracle Cloud platforms even after the deal is closed.

As a result, acquiring Wiz could help Google position itself as a leading multi-cloud service provider. The deal will also add another fast-growing revenue stream to Google Cloud. It further presents Google with an opportunity to reach large enterprise customers and nudge them towards its other cloud services like Mandiant, that also helps customers identify and address cyber threats.

Strengthening its own cybersecurity capabilities is another key benefit. “That price tag tells us that Google was almost desperate to boost its security bona fides before the adoption of AI gathers even more speed,” analysts were quoted as saying by CNBC.

However, Shai Morag, chief product officer, Tenable, told indianexpress.com that the downside of the acquisition is the end of Wiz’s independence and the neutrality its customers have come to expect when using any of the major cloud service provider platforms.

“When a security vendor is owned by a cloud provider, the lines can quickly become blurred and product decisions can start to favor one platform at the expense of all others. Neutrality becomes nearly impossible and the risk of competitive conflict is off the charts. Independent and cloud-agnostic security providers need only focus on protecting their customers’ cloud and hybrid environments, regardless of what platform or platforms they use,” Morag said.

What are the other details of the acquisition deal?

In its blog post announcing the deal, Google said that the Wiz acquisition was driven by growing trends of improved cloud security and the ability to use multiple clouds in the era of generative AI.

“The increased role of AI, and adoption of cloud services, have dramatically changed the security landscape for customers, making cybersecurity increasingly important in defending against emergent risks and protecting national security,” the company said.

Assaf Rappaport, the CEO and co-founder of Wiz, expressed that the Google acquisition is like “strapping a rocket to our backs.” “It will accelerate our rate of innovation faster than what we could achieve as a standalone company,” Rappaport said in another blog post.

“Wiz has achieved so much in a relatively short period, but cybersecurity moves at warp speed and so must we. The time is now. […] The vulnerabilities and the complexities, what can emerge in terms of mitigating cyber attacks, the whole security compliance regulation issue is a key thing in terms of managing cloud operation,” he added.

The breakup fee of more than $3 billion (or 10 per cent of the value of the deal between Google and Wiz) has raised eyebrows as it might be the highest such fees in M&A history, according to a report by Reuters.

For context, breakup fees or termination fees is a penalty paid by the buyer to the seller if the deal falls apart due to regulatory action or other unforeseen circumstances.

Will the deal clear antitrust review?

Since Google’s attempt to acquire Wiz last year faltered partly due to antitrust concerns, its latest bid raises fresh questions about whether the deal will withstand scrutiny by competition authorities.

During the Biden administration, Google lost a crucial antitrust case prosecuted by the US Justice Department and was held guilty of violating the country’s competition laws by maintaining an illegal monopoly in the search engine market.

It remains to be seen whether Donald Trump’s return to the White House has loosened antitrust enforcement. Andrew Ferguson, the new chair of the US Federal Trade Commission (FTC), suggested that the agency will continue keeping an eye on big tech companies.

“President Trump appointed me to protect Americans in the marketplace. And I’ve said since day one, Big Tech is one of our main priorities, and that remains true,” Ferguson said in an interview with CNBC.

How will it impact smaller cloud service providers in India?

“This transition creates challenges but also provides new opportunities for the smaller cloud service providers (CSPs) in India,” Navin Tripathi, senior director, Public Cloud, Global Operations, Ensono, told indianexpress.com.

“With Wiz’s incumbent presence, security demands will increase, compelling CSPs to spend on sophisticated solutions. It also presents opportunities for partnership—using Wiz’s multicloud security offerings can enable smaller players to beef up their security posture without heavy infrastructure investment,” he added.

Tripathi recommended that Indian cloud service providers prioritise stronger cybersecurity measures and differentiate themselves through niche solutions. “As global cloud providers double down on security, the ability to offer robust, compliant, and innovative cloud security services will define competitiveness in the evolving market,” he said.