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Google Explores Major Acquisition of HubSpot to Bolster Cloud

 |  May 23, 2024

Google’s parent company Alphabet is reportedly considering a significant acquisition of HubSpot, a U.S. marketing software maker valued at $31 billion. This potential deal could enhance Google’s competitive stance against Microsoft in providing cloud-based applications to businesses.

According to sources, including a report from Reuters last month, Google is actively exploring an offer for HubSpot. If finalized, this acquisition would mark Google’s largest deal to date, significantly expanding its suite of business-oriented products and applications. Analysts and investment bankers highlight that this move underscores Google’s strategy to challenge Microsoft’s dominance, particularly through its Google Workspace collaboration tools.

Cowen analyst Derrick Wood emphasized that acquiring HubSpot would position Google as a formidable player in the customer relationship management (CRM) sector, a market currently served by Microsoft’s Dynamics 365. “It does appear that Google has aspirations to try to take market share from Microsoft in the productivity suite, and they can use HubSpot to bundle applications together for clients,” Wood noted.

Related: Google’s Potential Acquisition of HubSpot Faces Regulatory Hurdles

HubSpot, known for its marketing software tailored to small and medium-sized businesses, is navigating the challenges of maintaining sales growth amid a broader economic slowdown. During the company’s first-quarter earnings call, CEO Yamini Rangan acknowledged a weakening in client demand as small businesses express concerns over the economic impacts of high interest rates. Despite these challenges, HubSpot reported a 23% increase in sales and a 15% operating margin in the first quarter.

Equity analysts have pointed out that HubSpot’s shares might have suffered had it not been for the acquisition interest from Google. Following the latest earnings report, most analysts covering HubSpot reduced their price targets, cautioning that the company’s focus on smaller businesses could be a vulnerability if economic conditions worsen and financing becomes more difficult for these clients.

Source: Reuters