Google is considering buying HubSpot

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According to Reuters, Alphabet, Google's parent company, is considering a bid to acquire HubSpot, a marketing software company valued at $35 billion.

If the offer goes ahead, it would be Alphabet's largest acquisition to date, and would offer it the opportunity to deploy some of its substantial cash reserves, which stood at $110.9 billion at the end of December. The news drove HubSpot shares up 11% to $693, while Alphabet shares fell 1% to $153.34.

According to Reuters, the latest meetings between Alphabet and investment bankers from Morgan Stanley focused on a potential bid for HubSpot, but more importantly on the appropriate amount of the offer and assessing the likelihood of regulatory approval for the proposed merger. Indeed, this decision marks a rare attempt by a major technology company to make a significant acquisition in the context of heightened regulatory scrutiny in the technology industry under President Joe Biden's administration.

Contacted Hubspot declined to comment on the rumor: "HubSpot does not comment on rumors or speculation. We continue to focus on building a great company and serving our customers," said a HubSpot spokesperson. According to Reuters, Alphabet has not yet made a formal offer to HubSpot.

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What is Hubspot?

HubSpot, which went public in 2014, specializes in providing marketing software tailored to businesses. Despite a net loss of $176.3 million in 2023, the 2,000-employee company, managed to generate $2.2 billion in revenues. However, investors remain enthusiastic about HubSpot's growth potential, as evidenced by the remarkable 50% rise in its shares over the past 12 months. The Cambridge, Massachusetts-based company continues to attract attention and optimism within the investment community.

Why would Google want to buy Hubspot?

A possible acquisition of HubSpot by Google would considerably strengthen its presence in the fast-growing customer relationship management (CRM)software market, paving the way for a broader base of corporate customers investing in marketing and advertising. The move would also strengthen Google'scloud computing business, with the aim of narrowing the competitive gap with rivals such as Microsoft and Amazon.

In addition, Google could argue to antitrust regulators that the acquisition would promote competition in the marketing and sales software sector, challenging the dominance of key players such as Salesforce and Microsoft. All the more so as many of these companies are integrating artificial intelligence into their offerings, an area in which Google is also investing heavily.

Among other things, Google is facing increased competition for advertising budgets from platforms such as Facebook, Instagram, TikTok and Amazon.

Finally, this potential deal reflects a broader trend of increasing transactions in the technology sector, as evidenced by recent acquisitions such as Synopsys, which bought Ansys for around $35 billion, and Hewlett Packard Enterprise, which struck a $14 billion deal to acquire Juniper Networks. Technology M&A dominated the first quarter, increasing by over 42% year-on-year to around $154 billion.