Last month we wrote a bit skeptically about the possibility of Google’s parent company Alphabet acquiring the digital marketing/CRM software company HubSpot.
Reporting this week from Bloomberg (subscription required) suggests the deal is still alive.
Bloomberg cited a source saying, “Alphabet has engaged in talks with HubSpot to discuss terms for a potential acquisition, though no agreement has been reached yet.”
Not So Worried After All
When we wrote about this last month, we were doubtful that Alphabet would pull the trigger and make an offer.
Our reason was not that Alphabet couldn’t afford the deal. As of March, Alphabet had $109 billion in cash on hand. Publicly traded HubSpot has a market cap of $30.4 billion, down from $33 billion last month. Alphabet could easily have swallowed HubSpot whole last month. And it would be just as easy for it to do so today.
Nor was our argument that there was no strategic imperative for Alphabet/Google to snap up HubSpot. The acquisition would position Google to compete more effectively for share of SMB wallets (HubSpot is popular with smaller companies) with rivals like Salesforce, Microsoft, and Oracle.
The main reason, we believed, was that Google didn’t want to give the U.S. Department of Justice another reason to hassle the search giant. A big acquisition could spark an antitrust review. The CRM space that HubSpot competes in is quite competitive. So any antitrust arguments would likely be fairly weak.
And it appears, at least for now, that Alphabet is not getting any signals that it will face the DOJ’s wrath if it goes through with an acquisition.
Meanwhile, HubSpot is plugging away. This week the company reported total Q1 2024 revenues of $617.4 million, up 23% over Q1 2023. Subscription revenues, which account for 97.8% of HubSpot’s revenue, grew 23% to 603.8 billion.
The company did report a GAAP operating loss of $23.2 million for the quarter.
HubSpot’s stock closed Friday up almost 2% at 597.95.
