Google is rumored to be eyeing HubSpot. Here are the pros and cons of the deal.

Author: Editors Desk, Lucia Maffei – Technology Reporter, Boston Business Journal
May 30, 2024 at 06:18
HubSpot is based at Two Canal Park in Cambridge. GARY HIGGINS / BOSTON BUSINESS JOURNAL
HubSpot is based at Two Canal Park in Cambridge. GARY HIGGINS / BOSTON BUSINESS JOURNAL

We spoke with an analyst with RBC Capital Markets about the persistent rumors that Google may want to buy HubSpot… 

Reports about a potential HubSpot takeover by Alphabet multiplied earlier this week, after first surfacing in early April.

CNBC reported Tuesday that the Google parent (Nasdaq: GOOGL) is looking at an all-stock offer for the Cambridge-based marketing software company (NYSE: HUBS), which has a market capitalization of over $30 billion. Google may have even upped its offer last week, according to another report.

HubSpot did not respond to a request for comment.One of the state's largest public companies, with $2.2 billion in annual revenue, HubSpot sells its marketing software on a subscription basis to companies that have up to 2,000 employees.

In recent years, the company has invested in artificial intelligence to enhance its products. Technology provided by industry leader OpenAI is at the core of such developments. Local VC firm Flybridge included HubSpot in its index tracking the performance of leading AI companies.

The Business Journal spoke on Wednesday with Rishi Jaluria, an analyst with RBC Capital Markets, about why Google would want to acquire the Boston-based company, and the challenges such a deal might face.


Why does the HubSpot deal make sense for Google?

Alphabet is one of the world's largest tech companies by market capitalization, one of few global firms that are valued at over $1 trillion. Last year, more than 75% of its total $307.4 billion revenue came from online advertising.

Jaluria said the acquisition of HubSpot's marketing platform would complement products such as Google Workspace — the suite of apps like Gmail, Docs, Drive, Calendar, and Meet — and Google Cloud. "There's real synergies," he said.

Google has been struggling with competition from Microsoft Corp. (Nasdaq: MSFT), maker of Teams and Outlook, according to Jaluria. Adding HubSpot's software on top of its current offerings may make Google more attractive to enterprise customers.

"Strategically, it makes a lot of sense for Google," Jaluria said. "It would bring a real product."


Would the acquisition face challenges?

Jaluria pointed out a few barriers to integrating HubSpot into Alphabet's current offerings.

For one, HubSpot's product infrastructure is currently hosted on Amazon Web Services, and would need to migrate fully to Google Cloud should the deal happen.

Furthermore, HubSpot's current collaboration with OpenAI — backed by Microsoft — would likely have to end. Transitioning HubSpot's AI products to Google Gemini, formerly Bard, may not be immediate, Jaluria said.

However, the biggest challenge of all is regulatory approval.

As multinational companies, HubSpot and Alphabet need to get the green light to merge from several regulators, including the Federal Trade Commission, the Department of Justice, the UK's antitrust body and the European Union.

In recent years, both domestic and international entities have pursued a strong antitrust agenda. Just earlier this year, and another local company, iRobot Corp. (Nasdaq: IRBT), terminated their $1.4 billion plans to merge due to regulatory concern.

Google already took the stand in a high-profile antitrust case.

Jaluria noted that many "reputable sources" have reported on Google's interest in acquiring HubSpot, so conversations are likely in progress. Yet he's skeptical that Google may even place a bid, as that would attract even more antitrust scrutiny.

"It's unlikely that a deal like this could go through," he said.

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