By Haozhe (James) Huang , Friedrich von Storch and Yujia Bao (IE Business School), Mikail Boudouda and Florent Onguen (Grenoble École de Management)
Photo: Adi Goldstein (Unsplash)
Overview of the deal
Acquirer: Google LLC
Target: Mandiant, Inc.
Implied Equity Value: $23 per share
Total Transaction Size: $5.4 billion
Announcement date: 8th March 2022
Target advisor: Goldman Sachs
The American tech giant Google has signed a $5.4 bn deal to acquire US-based cybersecurity company Mandiant. This offer agreement assumes a $23.00 per share, all in cash, representing a 57% premium to the undisturbed 10-day trailing volume-weighted average price as of February 7, 2022.
Mandiant will join Google cloud’s department to strengthen the protection of Google’s cloud customers against online threats. In direct competition with Microsoft, Google has succeeded in securing this strategic deal, which will be its second-largest acquisition - if approved by the regulators - since Motorola in 2011 for $12.5 bn.
“Organisations around the world are facing unprecedented cybersecurity challenges as the sophistication and severity of attacks that were previously used to target major governments are now being used to target companies in every industry,” -Thomas Kurian, CEO, Google Cloud.
Company Details (Google)
Google provides a variety of Internet-related services and products. Member of the GAFAM, Google’s website is the most visited worldwide. Since 1998, Google has constantly increased its variety of products and services, from search engines to cloud computing.
Founded in 1998, headquartered in Mountain View, California USA
CEO: Sundar Pichai
Number of employees: 156 500
Market Cap: $1,671 Trillion (as of 14/03/2022)
EV: $1,609 Trillion
LTM Revenue: $257,64 Billion
LTM EBITDA: $91,14 Billion
LTM EV/Revenue: x6.2
LTM EV/EBITDA: x17.0
Company Details (Mandiant)
Mandiant is a company that specialises in cyber defence solutions. Founded by a former US Air Force soldier, the firm uses a SaaS model through the Mandiant Advantage platform. Mandiant’s offer includes several products, from alert investigation to comprehensive protection.
Founded in 2004, headquartered in Reston, Virginia USA
CEO: Kevin R. Mandia
Number of employees: 2 335
Market Cap: $5,05 Billion (as of 14/03/2022)
EV: $4,35 Billion
LTM Revenue: $483,5 Million
LTM EBITDA: ($238,5 Million)
LTM EV/Revenue: x9.0
LTM EV/EBITDA: N/M
Projections and Assumptions
FireEye, which acquired Mandiant in 2013, spun the firm out last year shortly after McAfee acquired FireEye’s product businesses. Mandiant became a more attractive target for Google after the spin-off as it has no interest in security technologies like endpoint security, network sandboxes, or network security monitoring solutions, which had their roots in on-premises IT. Google’s acquisition of Mandiant comes at a crucial point when cloud cyber attacks are becoming more sophisticated and frequent as companies digitise their processes, switch to cloud services, and move to remote working.
The Mandiant deal is Google’s second-largest acquisition to date and the firm’s second acquisition in the cybersecurity space in 2022 after acquiring Israel-based Siemplify in January for a reported $500 million. Additionally, this deal increases the pressure on Amazon and Microsoft to engage in M&A in the race to market leadership. Through the acquisition, Mandiant will add more than 600 security consultants and over 300 intelligence analysts to Google’s cybersecurity team in the middle of a global struggle to find and retain cybersecurity talent.
Google is increasing its cybersecurity efforts to build a full-stack cloud computing platform with extensive security tech capabilities that match its cloud rivals. According to a study by Synergy Research Group, Google currently has a cloud market share of about 10%, trailing behind market leaders Amazon and Microsoft. Microsoft has been the most active cybersecurity acquirer of big tech, having made eight acquisitions since 2016, including deals to purchase CloudKnox and ReFirm labs in 2021. There were rumours that Microsoft was potentially closing the deal to acquire Mandiant before announcing its acquisition by Google.
Google’s acquisition of Mandiant proves its clear long-term strategic rationale for boosting its cloud computing business, Google Cloud, which currently represents around 7.5% of Google’s total revenue with an attractive annual growth rate of 47% from FY2020 to FY2021. With Mandiant’s industry-leading strategic security advisory and incident response services, Google aims to enhance its cloud services, delivering an end-to-end security operations suite with even greater capabilities to support customers across their cloud environments.
According to Markets and Markets, the global cloud computing service will grow to $950 bn by 2026 with a CAGR of 16.3% from 2021, a promising outlook for Google Cloud in the long run. However, defending cloud security is the most critical competitive advantage Google could have over its larger competitors in the public cloud business. Google and its main rival Microsoft have announced that they would invest over $10 billion over the coming five years.
The Mandiant acquisition will complement Google’s existing service offering in cybersecurity and add capabilities in threat detection and intelligence, automation and response tools, testing and validation, advisory services, and managed defence. All these services will be integrated into Google’s cloud unit, effectively expanding the platform into a full-service entity for cloud solutions, fortifying its competitive position in the market.
Risks and Uncertainties
As with any M&A transaction of this magnitude, this acquisition is subject to certain conditions, which remain uncertain. Three conditions threaten this deal: Firstly, the agreement of Mandiant's shareholders. Secondly, the validation of the regulatory authorities, notably regarding antitrust laws. Finally, the compliance with closing deadlines. With Lina Khan running the Federal Trade Commission (FTC) and Tim Wu as special advisors to the President for Technology and Competition policy, we have two strong antitrust proponents making this deal more likely to draw scrutiny. If these risks or uncertainties materialise, the deal's final terms could radically differ from its initial conditions.
“The security arguments Google is using to justify its second-largest acquisition in history are the very same reasons why antitrust enforcers must block this deal” – Krista Brown, Senior Policy Analyst at the American Economic Liberties Project.