Google (GOOGL.US) is in talks with cybersecurity startup Wiz about a potential acquisition that could be worth $23bn, according to people familiar with the matter. A deal would be the largest acquisition in Google’s history and could also help the company to strengthen its cloud computing business and narrow the gap with rivals.
“We think the acquisition multiple is high and is a strong bet on cybersecurity as a first-class enterprise brand play,” wrote Citi analysts led by Fatima Boolani in a note to investors. “The deal provides a clear enterprise value/market share pathway while also providing a structural impact on Wiz’s multi-cloud support [cloud-native application protection platform] for the next wave of network transformation, SecOps prioritization, and important public cloud migrations.”
If the deal goes through, Citi believes cybersecurity companies Palo Alto Networks (PANW.US) and CrowdStrike (CRWD.US) could benefit from the “noise” around Wiz’s lack of vendor neutrality. The bank also noted that it would be interesting to see how the six-year agreement (estimated to be in the tens of billions) between Palo Alto Networks and Google develops in light of potential “competitive overlap” between the two companies.
Citi also said the potential deal would have a “mixed impact” on other cybersecurity companies, including Zscaler (ZS.US), Checkpoint (CHKP.US), as their cloud-native application protection platform offerings are “less mature”. Other companies in the cloud-native application protection platform space, such as Fortinet (FTNT.US), SentinelOne (S.US) and Rapid7 (RPD.US), could also be negatively impacted.
It is worth noting that Morgan Stanley analysts also previously said that the Google acquisition of Wiz would raise questions about Wiz’s ability to remain neutral and work across clouds, “which could be beneficial in the short term for Palo Alto Networks and CrowdStrike as they can both position their independence as a competitive advantage.”