Alphabet Talking With Advisers on HubSpot Deal, Reuters Says

Brody Ford and Davey Alba, Bloomberg News

Antitrust concerns are among the issues Alphabet is weighing as it considers whether to make an offer and for how much. Photographer: Marlena Sloss/Bloomberg , Bloomberg

(Bloomberg) -- Alphabet Inc. is talking with financial advisers about potentially making an offer for HubSpot Inc., an online marketing software company valued at about $34 billion, Reuters reported on Thursday.

The Google parent has met in recent days with investment bankers at Morgan Stanley about a potential offer for HubSpot, Reuters said, citing people familiar with the discussions.

Such a large acquisition would be unusual for a Big Tech company like Alphabet, as the sector is under heightened scrutiny by antitrust regulators. Google is already in the midst of several antitrust challenges, including a lawsuit by the Justice Department accusing it of abusing its dominant position in online search and another one regarding its digital advertising tools.

HubSpot shares jumped 9% on the news, while Alphabet was down 0.5% in New York Thursday afternoon.

Antitrust concerns are among the issues Alphabet is weighing as it considers whether to make an offer and for how much, Reuters said. Alphabet hasn’t submitted a bid to HubSpot yet and there is no certainty it will do so. Alphabet didn’t immediately respond to requests for comment. HubSpot said it “does not comment on rumors or speculation.”

“Regulatory hurdles could prevent approval, yet a cash hoard of $111 billion and abundant free cash flow provide ample firepower for large-scale M&A,” Bloomberg Intelligence analyst Robert Schiffman wrote in a note.

Alphabet has been pouring more resources into its cloud customer business, including ramping up offerings on generative artificial intelligence tools for clients. Though Google still trails Microsoft Corp. and Amazon.com Inc. in the market for cloud computing, the company’s most recent earnings report marked the cloud unit’s first full year of profitability.

An acquisition of HubSpot, a customer relationship management company that focuses on smaller businesses, would fill a gap that could help Alphabet compete with other players in that market such as Microsoft, Oracle Corp. and Salesforce Inc. A deal “could help Google’s position in digital advertising with greater ability to leverage first-party data,” Oppenheimer analysts wrote in a note.

A tie-up could also increase pressure on Salesforce, the dominant customers relationship management software maker, wrote Bloomberg Intelligence’s Anurag Rana. “Currently, HubSpot focuses more on small and medium businesses, but the backing of Google might change that, challenging Salesforce’s roughly 40% market shares in cloud-based sales automation and customer service.” Shares of Salesforce dipped as much as 4% on the news before pairing losses.

Based in Cambridge, Massachusetts, HubSpot generated $2.2 billion in revenue in 2023 and its shares have gained more than 50% in the past year. Alphabet offers other productivity tools like cloud storage and video conferencing through its Workspace suite.

(Updates to reflect HubSpot declined to comment)