_{DEAL OF THE MONTH}

Google Wiz-zes Past Its Competition

The tech industry has always been known for wild deals at even wilder multiples. Just think of how many dot-com millionaires (and billionaires) were minted before everything came crashing down in the early 2000s. Recently though, the era of sky-high tech valuations has cooled a bit—as the industry has slightly matured.

At least, that’s what I thought… until Google dropped $32 billion on a company at a revenue multiple reportedly around 50x.

You’re probably wondering: what the hell is Wiz? What company could possibly be worth 50x revenue? Fair question.

Wiz is a cybersecurity company focused on protecting the cloud (so… I guess they make sure it doesn’t rain?).

Now this isn’t an episode of Silicon Valley, so I won’t be going into the nitty gritty of how each piece of tech works, but Google and Wiz will offer an end-to-end platform that any business or government regardless of scale can use to protect its cloud.

Let’s get into the deal. The transaction is actually relatively straightforward. Google will pay Wiz $32 billion in cash, subject to standard closing adjustments.

Once the deal closes, Wiz will be rolled up into Google’s cloud segment. What makes this deal interesting—aside from the sheer scale of it (size does matter, no matter what she tells you)—are the regulatory considerations. Big Tech has come under fire in both the U.S. and Europe, and with the uncertainty around Trump’s policies, getting this deal approved isn’t exactly a given, and Google and Wiz know it.

In fact, they even included a slide in their deck about how they’ll continue to operate separately until the deal gets through all required regulatory hurdles, with more details to come after approval.

Google has had a rough go of things share price wise this year, and it doesn’t look like this deal will make it any better. Google is down 5% in the past month and ~13% YTD. By the way that crater you see around March 18th - yea, that’s the day the acquisition was announced.

Typically, acquiring companies trade down, but in this market, it’s almost impossible to tell what’s due to macro sentiment vs. actual company performance. That said, the chart doesn’t lie, and it looks like shareholders weren’t thrilled.

All in all, this is a huge deal at a crazy multiple. Hopefully though, Google can make it rain (pun intended) for its shareholders and prove the haters wrong.

Oh, and by the way, this also became one of the best VC deals in history for Cyberstarts, who backed Wiz early and walked away with over 200x. The $1.3 billion Cyberstarts made from a $6.4 million investment in Wiz returned more than all four of its funds combined, which total ~$800 million.

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_{NEWS ROUNDUP}

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_{EXIT OF THE MONTH}

Pepsi Slurps Up Poppi

Pepsi (famous for being the worse version of Coke) just made headlines with a $2 billion acquisition of better-for-you soda brand, poppi.

Some of you fellow business hardos might remember your first introduction to poppi on Shark Tank. It was pitched under a different name (Mother), but same idea.

The Guest Shark that day was none other than Rohan Oza, famous for selling Vitamin Water to Coke for $4 billion. Oza invested in poppi on Shark Tank and helped lead its rebrand to the company you see today, with bright colors and a bit more pop(pi) than what was presented on Shark Tank.

In terms of the deal, poppi shareholders (including Oza’s CAVU Consumer Partners) will be getting $1.95 billion in cash.

Pepsi didn’t release a presentation on the acquisition, so there’s no info on poppi’s financials. But the better-for-you soda category is growing fast. So fast, in fact, that Coke is launching its own version under the Simply brand, and Walmart has dedicated an entire section of its beverage aisle to the category.

Pepsi’s share price jumped slightly the day after announcement, which is a good sign for the deal as typically acquirer share prices drop immediately following deal announcements.

There’s not a ton of analysis to be done here, but honestly, there doesn’t need to be. This one just makes sense. Consumers are getting healthier, and why build something from scratch when you can just buy it?

I’ve got no doubt Pepsi will make money off poppi. The question is, can they keep it edgy? In a sea of “better-for-you” sodas, it’s not just about flavor anymore, it’s about marketing.

poppi’s success has been driven in large part by CAVU’s branding and storytelling. It would be a mistake for Pepsi to lose that spark as poppi becomes part of the Pepsi empire.

From the Buysiders deal kitchen to yours, good luck Pepsi, and congrats to Rohan and the CAVU team!

_{INTERNATIONAL DEAL OF THE MONTH}

SoftBank Gets Amped By Another Deal

Few things in life are certain: death, taxes, and Masa overpaying for a tech company. SoftBank, it’s great to have you back in Buysiders.

So, what did Masa do this time? Well, he bought Ampere - a silicon design company - for $6.5 billion in cash. The transaction will be funded by debt (of course) provided by Mizuho.

One thing I’ve always found fascinating about international M&A is navigating foreign exchange rates. The Japanese yen might as well be Monopoly money right now, $6.5 billion = JPY 975 billion.

If you haven’t noticed by the glut of people on Instagram going to Japan, the yen is exceptionally weak right now. Down almost 30% over 5 years (though it has rallied slightly this year).

Interestingly, 56% of SoftBank’s cash is held in USD, which means they likely aren’t taking a huge FX hit on this deal, a relief to shareholders, I’m sure.

What’s also noteworthy is that this deal isn’t being done through the Vision Fund. This isn’t some wild WeWork-style moonshot, Ampere will be a direct SoftBank subsidiary.

A key reason? SoftBank already owns Arm Holdings, the European chipmaker. Arm and Ampere have a strong working relationship, so bringing them under one roof makes strategic sense.

Arm is one of SoftBank’s largest holdings, and Ampere will quickly become another, right behind Arm in terms of scale.

And yes, this deal marks the return of Masa’s signature big-swing style. $6.5 billion is more than SoftBank invested in the first 9 months of FY'24, and more than it invested in all of 2023, so yea, Masa is back to doing what he does best.

SoftBank’s share price initially popped on the announcement, check the spike around March 20, though it’s since cooled, likely due to broader geopolitical tensions between the U.S. and its trading partners.

Again, acquirers usually trade down, so SoftBank trading up on the days immediately following announcement is a good sign for this deal.

My corporate finance professor in college had a few memorable quotes. My favorite has to be “Leverage is like coc*ine. It makes the good times great and the bad times a lot worse”. By that logic, we may as well rename Masayoshi Son to Masayoshi Escobar because SoftBank is levered tf up.

Now Masa will argue that on an LTV basis, SoftBank is conservatively levered, but JPY 6.9 trillion, or ~$45 billion, PRIOR to this new financing from Mizuho is a lot of debt no matter how you calculate leverage.

All in all, SoftBank is one of those companies where you never know what it’ll do next, but you have to watch because you can’t look away. Masa is objectively a genius, but to quote a Japanese proverb - even monkeys fall from trees.