Reuters reported Thursday that Google’s parent company, Alphabet, is exploring the possibility of buying Boston-based HubSpot, a marketing automation and CRM company with a market capitalization of more than $33 billion, a figure that has gone increasing according to those reports.
If such a deal were to be concluded, the cost would likely be quite substantial and would carry a significant premium over the current value. It would have to be to motivate the company to sell and become part of the search giant. It’s worth noting that the two companies already have a relationship (a partnership to use Google Ads to drive sales on HubSpot) which can sometimes be the start of an acquisition discussion like this.
While Google/Alphabet has been extremely acquisitive over the years, the biggest deal it has ever made was spending $12.5 billion for Motorola Mobility in 2011. Later sold to Lenovo for only 2.910 million dollars, so you would have reason to be shy with a much higher price. Most recently, the biggest deal involved spending $5.4 billion on a security intelligence platform. Principal in 2022. Google typically stays below $3 billion, so a deal of this scope would be wildly out of character for the company.
When you combine that with the austerity program that most tech companies have implemented in recent years and a warning from Google CEO Sundar Pichai in January that more job cuts were coming, not the kind of deal that seems likely in a climate of belt-tightening, and certainly one that could be difficult to justify to employees if those kinds of optics really matter. However, with a whopping $110 billion of cash on hand at the end of last year, it certainly has the cash to make the decision if it so chooses.
Another issue the company could face when trying to buy HubSpot is a hostile regulatory environment for big deals. The United States, the United Kingdom and the EU have been closely monitoring the big deals these days. Something like Adobe’s attempt buying Figma for $20 billion fell short due to competitive concerns. It’s not clear that Alphabet would address those same concerns with a CRM tool. HubSpot faces some pretty powerful competition from Adobe and Salesforce, two well-capitalized companies, so this wouldn’t give Google a lock on that market by any means, but if there is a risk there will surely be a termination fee to protect itself. against that. , another factor that the company should take into account.
The question is what is the likelihood of such an agreement coming to fruition and what would it bring to companies that they cannot get from the existing partnership. As one analyst told me, it doesn’t seem likely, but you never know.