Google's $32 billion Wiz deal may signal a turning point for slow IPO, M&A markets

Google's acquisition of cybersecurity startup Wiz could be a turning point for an uncertain IPO market and a mergers and acquisitions environment aching from a slowdown in deal activity.

The search giant announced Tuesday it plans to buy the Israeli cybersecurity startup for $32 billion in its biggest acquisition ever. The deal came months after an initial $23 billion offer fell through and Wiz CEO Assaf Rappaport touted plans for an initial public offering.

While deal activity has slowed from its 2021 heyday, appetite has begun to pick up. 

SailPoint went public in February and CoreWeave, which sells Nvidia's AI processors, said in a Thursday filing that it plans to raise up to $2.7 billion in its IPO that's expected this week. Ticket vendor StubHub filed for an IPO on Friday.

Wiz's blockbuster deal could signal the opening of the floodgates for the IPO and M&A markets. 

Cybersecurity companies look particularly poised to win as companies hunt for ways to shield their highly profitable business models. CB Insights on Tuesday said cybersecurity solutions are one of the top acquisition target areas for 2025.

"Having a more complete offering for securing workloads in the cloud — that's the core, the rationale behind [the Wiz] deal," said Merritt Maxim, Forrester vice president and research director.

AI driving demand for more cybersecurity

The proliferation of artificial intelligence and the transition to the cloud has amplified the need for cybersecurity solutions.

More adept hacking schemes have accelerated since OpenAI's launch of ChatGPT in late 2022, expediting the need for cutting-edge solutions to fend off attackers. That's made cybersecurity a key target area for companies looking to protect their business models, said Neil Barlow, partner at the law firm Clifford Chance.

"Hacks and phishing could effectively cause a business to crash," said Barlow, who focuses on private equity M&A. "This is a business that is fundamental to operating, so cybersecurity has been a resilient area for quite some time."

While megacap technology giants haven't shied away from cybersecurity investments, AI tail winds have forced companies to beef up their offerings. Google's Wiz deal could force rival Amazon to make its own acquisition, Maxim said. Potential targets include startups Aqua Security, Orca Security and Sysdig.

"The Google-Wiz tie-up does give them some capabilities that make them stronger than AWS in some areas," Maxim said. "AWS could target acquisitions to potentially bring their solution closer to Google."

What's next for the IPO market

Wiz's mammoth buyout may dampen near-term sentiment for cybersecurity startups with IPO aspirations, but experts told CNBC they anticipate a pickup in the second half of the year.

One of those contenders is malware and phishing software maker Proofpoint, which told CNBC in October that it was exploring an IPO in the next 12 to 18 months. The company went private in 2021 in a $12.3 billion acquisition by private equity firm Thoma Bravo.

Forrester's Maxim said Proofpoint and Illumio are companies ripe for IPOs in the coming months. Illumio, which offers data center and cloud security, was a member of CNBC's Disruptor 50 list in 2017 and 2018.

Netskope, which also offers cloud security, is another company being closely watched for an IPO, said Brianne Lynch, head of market insight at EquityZen. Netskope told The Wall Street Journal last year that it was planning an IPO in 2025. The company may start to feel pressure from early investors hunting for liquidity 13 years after its founding, Lynch said.

Snyk, a cybersecurity startup founded about a decade ago, has also alluded to a public offering next year. The company was last valued at $7.4 billion and CEO Peter McKay said in a post last year that Snyk had crossed $300 million in annual recurring revenue.

The big question is whether now is the rip-the-bandage-off moment for companies that decide to go public or whether market volatility will cause companies to once again kick the can down the road, Lynch said.