Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Cyber security start-up Wiz has agreed a termination fee of around 10 per cent of its $32bn acquisition by Google parent company Alphabet, said people familiar with the matter, highlighting the significant antitrust risks the deal is expected to face under the Trump administration.
Alphabet on Tuesday announced that it had agreed to buy Wiz in its largest acquisition ever, reviving a deal that fell apart last summer after Wiz investors became spooked over antitrust concerns.
The large break fee shows how technology companies are still bracing themselves for pushback from antitrust regulators, even under President Donald Trump and his new Federal Trade Commission chair Andrew Ferguson. Lina Khan, the previous FTC chief, had taken an aggressive stance on Big Tech M&A, slowing the pace of dealmaking.
A reverse termination fee of more than $3.2bn, roughly 10 per cent of the total deal value, is among the largest of all time and will be activated should the deal collapse. Typically break up fees are around 2 or 3 per cent, while slightly more contentious deals can go up to 7 per cent but rarely at 10 or above. Adobe, for instance, paid Figma a break fee of $1bn, around 5 per cent of the deal value after it was blocked by antitrust regulators.
A person directly involved in the negotiation of the break-up fee said that the deal would have not gone ahead unless Alphabet agreed to such a high termination fee.
Under the deal terms, Wiz also has the freedom to effectively function as an independent company even if it gets ensnared in a lengthy antitrust case, allowing it to complete acquisitions and hire and fire employees, the people said.
Wiz shares many investors with product design software company Figma, which Adobe tried to buy in 2022 in a $20bn acquisition before the deal was abandoned 15 months later after a path to it being cleared by European antitrust regulators became untenable.
Wiz’s biggest shareholders include Silicon Valley venture capital funds Index Ventures, Andreessen Horowitz and Sequoia Capital, who were all also investors in Figma, and are now set for a large windfall from the biggest private deal ever.
After Alphabet’s deal talks to acquire Wiz for around $23bn collapsed last year, Wiz tapped new advisers to help the fast-growing start-up push for a sweetened valuation and better regulatory terms to the deal.
Wiz declined to comment. Google did not respond to an immediate request for comment.
Read the full article here
