Alphabet, Google’s parent company, has decided to drop its plans to acquire CRM giant HubSpot, according to Bloomberg and Reuters sources.
The former publication, citing people with knowledge of the matter, noted that preliminary talks never reached the point of "detailed discussions about due diligence."
Upon this revelation, HubSpot’s share price has plummeted 12 percent. Meanwhile, Alphabet is up 1.2 percent.
CX Today reported on the initial discussions in May. Yet, the regulatory fog engulfing big tech always made the deal unlikely.
After all, if Google could control not only a search system that drives traffic but also a popular CRM solution that manages customer relationships, it may have developed an anti-competitive CX workflow engine.
Such a vision would have asked a lot of regulators to decode, regulators who spent over a year trying to determine whether Figma was a direct competitor to Photoshop.
There are also questions over whether Google could have made the concerted effort necessary to develop that workflow engine.
As Rebecca Wetteman, CEO & Principal Analyst at Valoir, told CX Today when discussing the initial talks: "They've had multiple partnerships and acquisitions that haven't panned out as expected."
In the customer experience space, its partnership with Salesforce is perhaps the best example, which never built up the same steam as the AWS-Salesforce relationship mustered – despite predating it.
Noting this, Wetteman suggested: "Google still needs to shift towards serving enterprise customers and building their trust.
Historically, Google hasn’t done well in executing plans for enterprise products. Enterprises want assurance that the roadmaps they're given will be followed.
Alphabet has appeared keen to address this since hiring Thomas Kurian as CEO of Google Cloud in 2019.
Yet, the HubSpot acquisition may have alienated that enterprise base Google is working to win over, given the CRM leader’s prioritization of SMBs.
Such worries add to those regulatory approval concerns, with Alphabet already under investigation by the European Commission for anti-competitive behavior.
However, it’s not only Google. Apple, Microsoft, and Meta are also facing scrutiny from the EU regulator.
In such an environment, another lengthy investigation is not likely on Google's bucket list. However, it has the necessary cash to fund it.
Indeed, the search engine juggernaut reportedly has a cash pile of $110.9BN as of January 1, 2024. Theoretically, that gives Google the funds to snap up HubSpot – which has a market cap of $24.26BN (as of July 15, 2024) – four times over.
Showcasing this financial muscle may have been a significant driver for Google in exploring the HubSpot acquisition. As Wetteman said:
