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Alphabet + HubSpot. Google owner mulls $35 bln acquisition of software company

Alphabet + HubSpot. Google owner mulls $35 bln acquisition of software company
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HubSpot offers cloud software for automation, online marketing, and sales.

As reported by Reuters, Alphabet is consulting with investment bankers at Morgan Stanley regarding the potential acquisition of HubSpot. The company, which offers software for online marketing, currently has a market value of $35 billion. In 2023, HubSpot generated revenue of $2.2 billion, and its shares nearly doubled in value.

If Alphabet does submit a bid, this would be a rare example of a mega-deal by a tech giant amid tightening regulatory policies towards the sector. Google is already at the center of several antitrust cases, including a lawsuit by the Department of Justice accusing the company of abusing its dominant position in online search, as well as lawsuits regarding its digital advertising tools.

HubSpot's shares rose by 9% after the news was published on Thursday, while Alphabet's fell by 0.5%.

"Regulatory hurdles may impede approval, but Alphabet's $111 billion in cash reserves and significant free cash flow provide enough firepower for large mergers and acquisitions," wrote Bloomberg Intelligence analyst Robert Schiffman.

The acquisition could also be the largest in Alphabet's history. The previous major deal was the acquisition of Motorola Mobility for $12.5 billion in 2011 (which was later sold to Lenovo for just $2.9 billion).

Previously, regulators thwarted Adobe's attempt to buy Figma for $20 billion due to competition issues, so it will be interesting to see how Alphabet's attempts will be received. HubSpot faces strong competition from Adobe and Salesforce, so the acquisition is unlikely to give Google a monopoly, although it will exert some pressure on the companies.

"Currently, HubSpot focuses more on small and medium businesses, but Google's support could change that, challenging Salesforce's approximately 40% market share in cloud sales and customer service automation," wrote Anurag Rana of Bloomberg Intelligence.

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