Alphabet, Google’s parent company, is reportedly considering making an offer to acquire HubSpot, an online marketing software firm valued at $35 billion, Reuters reported quoting sources on Thursday. This move signals a rare attempt by a major technology firm to pursue a significant acquisition amidst increased regulatory scrutiny in the tech industry under President Joe Biden’s administration.
If the bid proceeds, it would mark Alphabet’s largest acquisition to date and provide an opportunity to deploy a portion of its substantial cash reserves, which stood at $110.9 billion by the end of December.
The news led to an increase of HubSpot stocks by 11% to $693 while Alphabet shares were down by 1% at $153.34.
According to the Reuters report, Alphabet has held meetings with Morgan Stanley investment bankers in the past few days regarding a potential bid for HubSpot. Discussions have centred around determining the appropriate offer amount and assessing the likelihood of regulatory approval for the proposed merger.
It was indicated that Alphabet has not yet formally presented an offer to HubSpot, and it remains uncertain whether it will proceed with one.
“As standard practice, HubSpot does not comment on rumours or speculation. We continue to focus on building a great business and serving our customers,” a HubSpot spokesperson said.
Neither Alphabet nor Morgan Stanley responded immediately to requests for comment.
What is HubSpot?
HubSpot, which went public in 2014, specializes in providing marketing software tailored for companies typically with up to 2,000 employees. Despite incurring a net loss of $176.3 million in 2023, the company managed to generate $2.2 billion in revenue. However, investors remain enthusiastic about HubSpot’s potential for growth, reflected in a remarkable 50% increase in its shares over the past 12 months. The Cambridge, Massachusetts-based firm continues to attract attention and optimism within the investment community.
A potential acquisition of HubSpot by Google would significantly enhance its presence in the expanding customer relationship management (CRM) software market, opening up opportunities to serve a broader base of enterprise clients investing in marketing and advertising. This move would also strengthen Google’s cloud computing business, aiming to close the competitive gap with rivals like Microsoft and Amazon.
Additionally, Google could argue to antitrust regulators that the acquisition would foster competition in the marketing and sales software sector, challenging the dominance of key players such as Salesforce and Microsoft, especially as many of these companies are integrating artificial intelligence into their offerings, an area where Google is also investing heavily.
The company faces intensified competition for advertising budgets from platforms like Facebook, Instagram, TikTok, and Amazon. This potential deal reflects a broader trend of increased dealmaking within the technology sector, as evidenced by recent acquisitions such as Synopsys purchasing Ansys for about $35 billion and Hewlett Packard Enterprise striking a $14 billion deal to acquire Juniper Networks. Technology mergers and acquisitions dominated the first quarter, surging over 42% year-on-year to approximately $154 billion, according to Dealogic.
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