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

Reuters reported on Thursday that Google parent Alphabet was exploring the possibility of acquiring Boston-based HubSpot, a CRM and marketing automation company with a market value of more than $33 billion, and the numbers in those reports have been climbing.

If such a transaction were to occur, the costs would likely be considerable, involving some significant premiums to current values. There has to be an incentive for the company to sell and become part of a search giant. It’s worth noting that the two companies already have a partnership to use Google Ads to drive HubSpot sales, which could sometimes be the start of such acquisition discussions.

While Google/Alphabet has been making big acquisitions over the years, its largest ever deal was its $12.5 billion acquisition of Motorola Mobility in 2011. It later sold it to Lenovo for just $2.91 billion, so it had reason to be cautious about acquiring Motorola Mobility. Bigger price tag. The largest recent deal is the $5.4 billion acquisition of security intelligence platform Mandiant in 2022. Google typically stays under $3 billion, so a deal of this size would be very out of character for the company.

When you combine this with the austerity plans most tech companies have implemented in recent years, as well as Google CEO Sundar Pichai’s warning in January that more layoffs were coming, you get It turns out that in a belt-tightening environment, such a deal seems unlikely to happen. , of course, if such optics are indeed important, it may be difficult to justify to employees. However, with a massive $110 billion in cash on hand as of the end of last year, the company certainly has enough cash to make a move if it chooses to.

Another issue the company could face in trying to acquire HubSpot is a regulatory environment that’s unfavorable to large deals. The US, UK and EU have been keeping a close eye on large deals of late. Some projects, such as Adobe’s attempt to acquire Figma for $20 billion, failed to complete due to competitive issues. It’s unclear whether Alphabet will face the same concerns with its CRM tools. HubSpot faces pretty strong competition from Adobe and Salesforce, two well-capitalized companies, so this doesn’t lock Google into that market in any way, but if there is a risk there will certainly be a termination fee involved to hedge that risk , another factor that companies need to consider.

The question is how likely such a deal is to come to fruition, and what it will give these companies that they can’t get from existing partnerships. As one analyst said to me, it feels unlikely, but you never know.