Alphabet considers record-breaking acquisition of HubSpot

Alphabet, the parent company of Google, is reportedly in talks to acquire HubSpot, a leading marketing software company, in what could potentially become its largest acquisition.

According to reports from Reuters, discussions between Alphabet and advisers from Morgan Stanley have centered around the possibility of acquiring HubSpot and the potential implications regarding antitrust concerns. The parties have deliberated on the size of a suitable offer for HubSpot and whether the acquisition could attract scrutiny from antitrust authorities.

HubSpot, headquartered in Cambridge, Massachusetts, boasts a market valuation of $35 billion. Following reports of a potential acquisition, the company's shares surged by as much as 11% to reach $693, although they experienced a slight decline to $660 by the close of trading.

Founded in 2014, HubSpot serves a client base primarily composed of companies with an average staff size of around 2,000 employees. In 2023 the company posted a net loss of $176.3 but, interestingly, it generated $2.2 billion in revenue. Investors remain optimistic about HubSpot's growth prospects, driving its shares up by 50% over the past 12 months.

Alphabet has yet to make a formal offer for HubSpot, and the possibility of an acquisition remains uncertain. As implied earlier one of the biggest obstacles they have to deal with is antitrust regulators, particularly given the company’s ongoing legal challenges related to alleged monopolistic practices.

In the United States, Alphabet is currently facing two lawsuits filed by the Department of Justice (DOJ), accusing the tech giant of monopolizing the digital advertising and search engine markets. Meanwhile, in the European Union (EU), both Apple and Alphabet are under investigation for alleged anti-competitive practices, including restrictions on communication and steering.

Additionally, the tech conglomerate faces a separate EU investigation for favoring its own products and services in search results, potentially giving it an unfair advantage over competitors.

However, Google could argue that the acquisition will help increase competition in the marketing and sales software market that’s currently being dominated by Salesforce and Microsoft.

Acquiring HubSpot would not only broaden Google's portfolio within the thriving customer relationship management (CRM) software market but also grant access to a broader spectrum of enterprise clients heavily invested in marketing and advertising initiatives.

Additionally, it presents a big opportunity for Google's cloud computing division, as it looks to close the competitive distance with industry rivals such as Microsoft and Amazon.