Written by Anirban Sen and Milana Vin
(Reuters) – Google parent Alphabet Inc. is in talks with its advisers about a potential takeover bid for HubSpot, the $35 billion online marketing software company, people familiar with the matter said.
If Alphabet goes ahead with its bid, it would be a rare example of a major technology company attempting a mega-deal as the sector faces increased regulatory scrutiny under President Joe Biden's administration.
The potential acquisition would be Alphabet's biggest ever, allowing it to tap into some of the company's cash pile, which totaled $110.9 billion at the end of December.
Alphabet has met with Morgan Stanley investment banking officials in recent days about a potential offer for HubSpot, the people said. The sources added that antitrust regulators are discussing how much to offer and whether to break up such a partnership.
Alphabet has not yet made an offer to HubSpot and there is no certainty it will, the people said, requesting anonymity to discuss confidential discussions.
“As a standard practice, HubSpot does not comment on rumors or speculation. We remain focused on building a great business and serving our customers,” a HubSpot spokesperson said. .
Alphabet and Morgan Stanley did not respond to requests for comment.
HubSpot stock rose 11% to $693 on Thursday's news. Alphabet shares fell 1% to $153.34.
HubSpot, which went public on the stock market in 2014, provides marketing software to companies that typically have up to 2,000 employees.
In 2023, it had revenue of $2.2 billion and a net loss of $176.3 million. Despite the losses, investors were excited about the Cambridge, Mass.-based company's growth prospects, and its stock rose 50% in 12 months.
The partnership with HubSpot expands Google's offering in the fast-growing customer relationship management (CRM) software market, allowing it to reach a broader base of enterprise customers spending on marketing and advertising.
It would also be a boon for Google's cloud computing business, which is trying to close the competitive gap with rivals Microsoft and Amazon.com.
Google could also argue to antitrust regulators that the acquisition would increase competition in the marketing and sales software space, challenging the dominance of companies like Salesforce and Microsoft. Many of these companies are enhancing their services with artificial intelligence, a technology that Google is also investing in to gain an edge.
Google faces several antitrust challenges, including a landmark lawsuit accusing it of abusing its position as the leader in online search.
Alphabet CEO Sundar Pichai is exploring ways to boost growth after the company revealed in January that fourth-quarter ad sales were lower than expected. The company's Google search engine and YouTube video streaming service are facing increasing competition for advertising dollars from other online platforms such as Facebook, Instagram, TikTok and Amazon.com.
Deals in the broader technology sector are picking up steam. In January, design software company Synopsys agreed to buy smaller rival Ansys for about $35 billion. In January, Hewlett Packard Enterprise signed a deal to acquire network equipment maker Juniper Networks for $14 billion.
Technology-related businesses accounted for the largest share of mergers and acquisitions in the first quarter, up more than 42% from a year ago to about $154 billion, according to Dealogic.
(Reporting by Anirban Sen and Milana Vine in New York; Additional reporting by Jeffrey Dustin in San Francisco; Editing by Chizu Nomiyama, Nick Zieminski and Richard Chan)
