As deal rumors fly, Alphabet and HubSpot would be a strange pairing

Reuters reported on Thursday that Google’s parent company, Alphabet, is exploring the possibility of buying Boston-based HubSpot, a CRM and marketing automation company with a market cap of over $33 billion — a number that has been climbing on those reports.

If such a deal were to happen, the cost would likely be pretty substantial, involving some significant premium over the current value. It would have to be to motivate the company to sell and become part of the search giant. It’s worth noting that the two companies have a relationship already — a partnership to use Google ads to drive sales in HubSpot — which can sometimes be the start of an acquisition discussion like this.

While Google/Alphabet has been extremely acquisitive over the years, the largest deal that it’s ever made was spending $12.5 billion for Motorola Mobility in 2011. It later sold it to Lenovo for just $2.91 billion, so it would have reason to be gun shy on a much larger price tag. More recently the largest deal involved spending $5.4 billion for security intelligence platform Mandiant in 2022. Google usually stays under $3 billion, so a deal of this scope would be very much out of character for the company.

When you combine that with the austerity program that most tech companies have been on in recent years, and a warning from Google CEO Sundar Pichai in January that more job cuts were coming, it’s not the type of deal that seems likely in a belt-tightening climate, and certainly one that might be tough to justify to employees if those kinds of optics actually matter. Yet with a huge cash horde of $110 billion on hand as of the end of last year, it certainly has the cash to make the move if it wants to.

Another issue the company could face in trying to buy HubSpot is a hostile regulatory environment for large deals. The U.S., the U.K and the EU have been monitoring large deals closely these days. Some, like Adobe’s attempt to buy Figma for $20 billion didn’t make it to the finish line because of competitive concerns. It’s not clear that Alphabet would face those same concerns with a CRM tool. HubSpot faces pretty powerful competition from Adobe and Salesforce, two well-capitalized firms, so this wouldn’t give Google a lock on that market by any means, but if there’s a risk, there’s sure to be a termination fee involved to hedge against that, another factor the company would need to take into consideration.

The question is what is the likelihood of such a deal coming to fruition and what would it give the companies that they can’t get from the existing partnership. As one analyst said to me, it doesn’t feel likely, but you never know.