Google Inc.’s (NASDAQ:) discussions to potentially acquire cybersecurity company Wiz for $23 billion have fallen through, according to a report Tuesday by The Wall Street Journal.
The Wall Street Journal reported that Wizz CEO Asaf Rappaport said in an email to employees sent on Monday and seen by The Wall Street Journal that the company is now seeking an initial public offering.
“Wizards, I know the past week has been intense, with the buzz around a potential takeover,” he reportedly wrote.
“While we are pleased with the offers we have received, we have chosen to continue on our path to building Wiz.”
He added that he intends to achieve annual recurring revenue of $1 billion before the initial public offering.
The Wall Street Journal added that the size of the potential deal was not expected to yield results from the talks. However, the newspaper indicated that it is possible that the companies will return to the negotiating table.
In response to the report, analysts at TD Cowen said in a note that “the apparent end to these talks may be driven by antitrust concerns.” They acknowledged that the cloud security market, estimated to be worth $35 billion in 2022, is not yet dominated by a handful of leaders.
Meanwhile, analysts said they believe “the failure of this deal to happen will have cascading effects across the entire sector.”
“First, Google still wants to double down on its cybersecurity efforts and
“The shift to the cloud has only accelerated this potential strategic move,” they wrote. “We also believe that for Microsoft, as well as Google and Amazon, the CrowdStrike outage since Friday has further highlighted the interconnected nature of cybersecurity software and the cloud computing ecosystem.”
While a Wiz deal is not on the cards at this time, analysts say this could start a cycle of mergers and acquisitions, as large cloud computing and tech companies look to acquire cybersecurity software within their broader product portfolio.
“We believe that consolidation in the cybersecurity space is overdue, and we expect Microsoft to take this path and seek to strengthen its cybersecurity platform over the next 12 to 18 months alongside Google’s search for other candidates across both the public and private sector cybersecurity vendors,” the company concluded.