Alphabet is not going forward with HubSpot acquisition

Google’s parent company, Alphabet, has decided to abandon its pursuit of customer relationship management (CRM) software provider HubSpot. The news was first reported on Wednesday by Bloomberg News. 

No detailed discussions about due diligence

The decision comes after months of speculation and negotiations between the two tech giants. Alphabet had expressed interest in HubSpot earlier this year, eyeing the company’s strong revenue growth and potential to boost Google’s cloud and business software offerings. HubSpot has been reporting revenue growth above 20% for the past six quarters. In the last quarter, its sales increased 23% to $617.4 million. However, the negotiations failed to progress beyond initial discussions, and the companies did not enter into detailed due diligence talks.

Dominant position in the CRM market

A successful acquisition would have marked one of the largest tech deals of the year and propelled Google into a dominant position in the CRM market. HubSpot develops software that companies use to automate marketing and reach prospective customers. Acquiring HubSpot would have helped Google grow revenue from business software, alongside cloud infrastructure, as well as other non-cloud businesses under the Alphabet umbrella. 

Regulatory scrutiny

Analysts speculate that regulatory scrutiny may have played a role in Alphabet’s decision. The tech giant has already faced antitrust lawsuits from the U.S. Department of Justice and multiple states, alleging anti-competitive practices in the search and advertising markets. Buying HubSpot could have further intensified regulatory scrutiny. With the HubSpot deal off the table, Google will likely explore alternative strategies to bolster its cloud and enterprise software business. 

Independent player in a growing market

For HubSpot, the failed acquisition attempt could be a mixed bag. While its market value took a hit on Wall Street following the news on Wednesday, the company remains an independent player in a growing market. The CRM software market size has grown rapidly in recent years. According to The Business Research Company, it will grow from $142.72 billion in 2023 to $163.36 billion in 2024 at a compound annual growth rate (CAGR) of 14.5%, and reach $281.21 billion in 2028. HubSpot will need to continue innovating and expanding its product offerings to maintain its momentum. The company, which launched in 2006 and went public in 2014, has a market capitalization of $25 billion and has been led by the former Dropbox Inc. and Workday Inc. executive Yamini Rangan since 2021.