Google's $32 Billion Wiz Deal May Signal a Turning Point for Slow IPO and M&A Markets

Google's acquisition of cybersecurity startup Wiz could be a turning point for an uncertain IPO market and a mergers and acquisitions environment that has been struggling to regain momentum. The search giant announced Tuesday that it plans to buy the Israeli cybersecurity startup for $32 billion, its biggest acquisition ever. This deal comes months after an initial $23 billion offer fell through and Wiz CEO Assaf Rappaport touted plans for an initial public offering.

Despite a slowdown in deal activity from its 2021 heyday, appetite has begun to pick up. Recent IPOs include SailPoint's debut in February and CoreWeave's expected listing this week, with Ticket vendor StubHub filing for an IPO on Friday. The Wiz deal could signal the opening of the floodgates for the IPO and M&A markets, with cybersecurity companies looking particularly poised to win.

Cybersecurity solutions are one of the top acquisition target areas for 2025, according to CB Insights. "Having a more complete offering for securing workloads in the cloud — that's the core, the rationale behind [the Wiz] deal," said Merritt Maxim, Forrester vice president and research director.

The proliferation of artificial intelligence and the transition to the cloud have amplified the need for cybersecurity solutions. More adept hacking schemes have accelerated since OpenAI's launch of ChatGPT in late 2022, expediting the need for cutting-edge solutions to fend off attackers. That's made cybersecurity a key target area for companies looking to protect their business models.

"Hacks and phishing could effectively cause a business to crash," said Neil Barlow, partner at the law firm Clifford Chance. "This is a business that is fundamental to operating, so cybersecurity has been a resilient area for quite some time."

While megacap technology giants haven't shied away from cybersecurity investments, AI tail winds have forced companies to beef up their offerings. Google's Wiz deal could force rival Amazon to make its own acquisition, Maxim said. Potential targets include startups Aqua Security, Orca Security and Sysdig.

"The Google-Wiz tie-up does give them some capabilities that make them stronger than AWS in some areas," Maxim said. "AWS could target acquisitions to potentially bring their solution closer to Google."

As for the IPO market, Wiz's mammoth buyout may dampen near-term sentiment for cybersecurity startups with IPO aspirations. However, experts tell CNBC they anticipate a pickup in the second half of the year.

Netskope, which also offers cloud security, is another company being closely watched for an IPO, said Brianne Lynch, head of market insight at EquityZen. Netskope told The Wall Street Journal last year that it was planning an IPO in 2025. The company may start to feel pressure from early investors hunting for liquidity 13 years after its founding.

Snyk, a cybersecurity startup founded about a decade ago, has also alluded to a public offering next year. The company was last valued at $7.4 billion and CEO Peter McKay said in a post last year that Snyk had crossed $300 million in annual recurring revenue.

The big question is whether now is the rip-the-bandage-off moment for companies that decide to go public or whether market volatility will cause companies to once again kick the can down the road, Lynch said.