It was going to happen last year but Wiz said they wanted to IPO. Wonder what that implies about the larger IPO/exits market.
Here's the letter sent by the CEO Assaf Rappaport to his team at the time (2024):
"Wizards,
I know the last week has been intense, with the buzz about a potential acquisition. While we are flattered by offers we have received, we have chosen to continue on our path to building Wiz.
Let me cut to the chase: our next milestones are $1 billion in ARR and an IPO.
Saying no to such humbling offers is tough, but with our exceptional team, I feel confident in making that choice."
Wiz by itself is a great business and public markets will price it accordingly, but Google is able to price it much higher because of its unique position. Wiz + GCP sales team will boost adoption of the main product, a Google branded security tool keeps eyes from looking out, and of course, the ability to move huge amounts of revenue from competitors over to GCP is something only a hyper-scaler can tap. At 36x+ valuation, this is still a great deal for Google.
On what are you basing your opinion that this is a "great deal"? Google is going to have to earn close to $100B in profit attributable to this acquisition over the next 10 years in order to financially justify it.
> On what are you basing your opinion that this is a "great deal"? Google is going to have to earn close to $100B in profit attributable to this acquisition over the next 10 years in order to financially justify it.
Maybe like the Motorola acquisition - not so much the profit attributle from the acquisition but the profit they *won't* lose by not acquiring them.
That $100B is a based on a ballpark estimate of how much a passive investor would expect to earn by putting $32B of their money into a high-yield stock fund (yielding 15% per year, which is a conservative annual growth rate for a cloud provider) and sitting on it for 10 years. If Google can't do at least as well as that, the investor would be better off with the stock fund.
It's smart defense, great offense, and a good product behind it. Each eat a big chunk of that $100B target. I don't see Wiz as a 10 year company, I see it as a forever requirement for companies to manage all of their cloud resources (across all providers). It will be here as long as GCP/AWS are here. I expect a short path to ROI on this one.
Wiz is a recognized leader in the CNAPP/DevSecOps market, and so they'd be naturally attractive to any cloud hyperscaler. Google had to either build or buy a similar solution to grow GCP; and they chose to buy. But $32B is an enormous hunk of cheddar, and I don't know why they felt compelled to pay that much. The ROI on such a large investment is unclear.
It gives them (legally debatable) visibility into how customers are using their competitions products. That's part of the reason it didn't happen under the Biden administration. Trump is very much against enforcing anti-competition laws though, so the deal suddenly began to make sense again.
Google would have to be contractually bound not to do that, or Wiz customers would flee like rats off a sinking ship, which would significantly devalue their investment.
A lot has happened in the last 56 days that has resulted in significant uncertainty in the stock markets. That, combined with the higher offer, apparently changed the board's mind.
Here's the letter sent by the CEO Assaf Rappaport to his team at the time (2024):
"Wizards,
I know the last week has been intense, with the buzz about a potential acquisition. While we are flattered by offers we have received, we have chosen to continue on our path to building Wiz.
Let me cut to the chase: our next milestones are $1 billion in ARR and an IPO.
Saying no to such humbling offers is tough, but with our exceptional team, I feel confident in making that choice."
https://techcrunch.com/2024/07/22/wiz-walks-away-from-google...