New York: Not long after Google's attempt to purchase Israeli cybersecurity company Wiz failed, executives successfully finalised an agreement during intense discussions following the inauguration of U.S. President Donald Trump just eight weeks ago. Google (GOOGL.O) unveiled a revised proposal that enhanced its initial offer from $23 billion in July to $32 billion, positioning it among the largest tech transactions ever while significantly increasing the breakup fee to over $3.2 billion, according to individuals knowledgeable about the agreement. Nonetheless, the truly decisive factor for Wiz and Google executives was the shift at the White House that introduced the possibility of a more amicable antitrust review under Trump, according to these individuals, per a Reuters report.
According to these individuals, Google conducted another round last fall as Wiz contemplated a possible IPO. As negotiations proceeded intermittently for months, executives began to convene consistently to finalise the specifics of an agreement following Trump's inauguration on Jan. 20 and the installation of crucial antitrust officials in his administration, these sources indicated. Fazal Merchant was appointed as the new Chief Financial Officer of Wiz in January, coinciding with the company considering a possible initial public offering. Merchant was instrumental in finalising the agreement, working alongside CEO Assaf Rappaport and aiding in bringing it to completion, as stated by one individual. According to two individuals, Thomas Kurian, the head of Google's cloud division, played a significant role in shaping the agreement.
Google-Wiz deal, Trump impact
Wiz executives struggled to reject Google's updated proposal, which appraised the cybersecurity startup at 39 per cent more than the previous offer and also featured a larger reverse breakup fee exceeding $3.2 billion, or more than 10 per cent of the deal's value, payable to Wiz if the agreement fails, according to the sources. Google considers the premium warranted due to Wiz's 70 per cent yearly revenue increase and more than $700 million in annualised revenue, as per a source acquainted with the talks. Reverse termination fees, often known as breakup fees, are paid by purchasers to reimburse target firms when agreements fail because of regulatory issues. Such a significant breakup fee is rare in corporate transactions in the United States, although these fees have been increasing recently due to the rising global regulatory threats to major deals.
A study conducted by the law firm Fenwick & West, which analysed deals valued at a minimum of $1 billion finalised in 2023, found that breakup fees typically ranged from 4 per cent to 7 per cent of the total transaction value, per Reuters.
It remains uncertain whether Google and Wiz contacted U.S. antitrust regulators before finalising the agreement. Certain firms have proactively informed U.S. antitrust regulators to prepare them ahead of finalising a deal. For example, in 2023, Tempur Sealy requested approval from the U.S. Federal Trade Commission before finalising a $4 billion agreement to purchase Mattress Firm. Wiz executives felt cautious after witnessing Adobe's (ADBE.O) $20 billion bid for Figma collapse because of antitrust concerns in late 2023, according to two sources. Google is currently facing two lawsuits from the U.S. Department of Justice regarding its dominance in online search and an additional one concerning ad technology.
According to sources, Google proposed a breakup fee of approximately $2 billion to Wiz at that time, but Wiz believed that amount was insufficient to justify the risk of entering into the agreement. According to sources, some of Wiz's biggest venture-capital investors were concerned that Lina Khan, who was then the Chair of the Federal Trade Commission, might jeopardise the deal. Trump's selection of Andrew Ferguson to lead the FTC and Gail Slater to oversee antitrust evaluations at Justice also boosted the confidence of executives at both firms regarding a more streamlined regulatory review, according to individuals familiar with the arrangement.
FIRST Business Portal addressing the potential of business capability of North East Region.
