The big picture behind Google's largest acquisition failure

livemint.com:

Alphabet-Wiz deal with interest was the potential fillip it could provide to M&A deals. According to a June report by consulting firm PwC, the number of M&A deals fell by 25% in the first half of 2024, compared to the year-ago period, a downward trend that began in 2022. "The daunting combination of high interest rates, current valuations and political uncertainty has been a showstopper for many deals," it said.

After turning down Alphabet's offer, Wiz CEO Assaf Rappaport said in a memo to the company staff that it would pursue an IPO. IPOs, another key exit option for investors, have also been down in the past few quarters, both in the US and globally. According to S&P Global, US companies launched 25 IPOs in the first quarter of 2024, up from 23 during the same period in 2023 but far lower compared to 357 in Q1 2021.

The IPO market has been slow since 2021. Wiz's confidence, despite the muted IPO market, comes from the health of the segment it operates in—cloud security. In just over two years of its founding, it hit an annual recurring revenue of $100 million, and counts 25% of Fortune 100 companies among its clients, a reason why Alphabet was willing to pay a huge premium over its previous valuation.

Wiz can now anchor that to command a better price. It's supported by demand for cloud security. According to Gartner, cloud security spending has been outpacing other security products and services in 2022 and 2023, and is expected to do so again in 2024.

That, in turn, is driven by the growing cloud adoption. By 2028, cloud computing will shift from being a technology disruptor to becoming a necessary component to maintain business competitiveness, Gartner said last year. Simultaneously, cybersecurity risks are