As deal rumors swirl, Alphabet and HubSpot would be an odd pairing


Reuters reported on Thursday that Google's parent company, Alphabet, is exploring the possibility of buying Boston-based HubSpot, a CRM and marketing automation company with a market cap of more than $33 billion — a number that is climbing over those reports. Is.

If such a deal were to happen, the cost would likely be quite high, involving some significant premium over the current price. This would motivate it to sell the company and become part of the search giant. It's worth noting that the two companies already have a relationship in place – a partnership at HubSpot to use Google Ads to drive sales – which could sometimes be the beginning of an acquisition discussion like this.

While Google/Alphabet has been highly acquisitive over the years, the biggest deal it ever made was spending $12.5 billion for Motorola Mobility in 2011. It later sold it to Lenovo for just $2.91 billion, so there would be no reason to be embarrassed by that. Huge price tag. The biggest recent deal involves spending $5.4 billion in 2022 for security intelligence platform Mandiant. Google typically makes less than $3 billion, so a deal of this scope would be very unfair to the company.

When you combine this with the austerity programs run by most tech companies in recent years and Google CEO Sundar Pichai's warning in January that more jobs were being cut, this is not the type of deal that would lead to belt tightening. Seems possible in this environment. , and it certainly may be hard to justify to employees if these types of optics really matter. Yet with a massive $110 billion in cash available as of the end of last year, it certainly has the cash to make a move if it wants to.

Another problem the company may face in trying to buy HubSpot is the unfavorable regulatory environment for large deals. America, Britain and the European Union are keeping a close eye on big deals these days. Some, such as Adobe's attempt to buy Figma for $20 billion, did not reach the finish line due to competitive concerns. It's not clear whether Alphabet will face the same concerns with its CRM tool. HubSpot faces fairly powerful competition from Adobe and Salesforce, two well-capitalized firms, so this won't give Google a lock on that market by any means, but if there's a risk, there's a termination fee to hedge against. Sure to be included. , another factor that the company needs to take into account.

The question is what are the chances of such a deal succeeding and what will it give the companies that they cannot get from existing partnerships. As one analyst told me, it doesn't seem likely, but you never know.