alphabet, Google's parent company, is considering making a bid for HubSpot. HubSpot is a marketing software company with a market value of $34 billion. It operates in the customer relationship management (CRM) software sector and can also be used to create and manage websites.
There are already strong competitors in the CRM sector such as Salesforce, Adobe, Microsoft and Oracle. According to Reuters, Google is not yet active in this sector. However, if Google were to acquire HubSpot, the company could be strengthened by Google's cloud computing resources.
Market share in the CRM sector: HubSpot versus Salesforce and Adobe
According to technology researcher Gartner, HubSpot, which focuses on smaller clients, had a 4.9 percent market share of the CRM marketing software industry in 2022, while Salesforce and Adobe each had a share of the 15 percent.
Despite these potential acquisition benefits, a Google deal for HubSpot is expected to face challenges from US and European antitrust regulators. Seth Bloom, former attorney general of the Senate Antitrust Committee, told Reuters that he expected such a deal could face significant opposition from antitrust regulators.
Antitrust problems for Google
Google already has some antitrust problems. These include two lawsuits from the United States Department of Justice. They accuse Google of abusing its dominant position in online searches and dominating the digital advertising market. Google is also having difficulties in Europe. There is one of the technology companies that are being investigated by the European Union. The reason: possible violations of the new “Digital Markets Law.”
The Digital Markets Act is a new European Union law that aims to promote competition in the digital economy by limiting the power of large technology companies and facilitating the mobility of users between competing online services.
Antitrust law is stopping mega deals in the tech industry
The intensity of antitrust scrutiny has deterred most tech giants from pursuing mega deals. The last major acquisition was that of Microsoft. with the purchase of Activision Blizzard, the creator of “Call of Duty,” for $69 billion.
Before considering HubSpot, Google had avoided major acquisitions. Its biggest deal to date was its $12.5 billion purchase of Motorola Mobility more than a decade ago. Instead, Google has favored smaller acquisitions, particularly in advertising, with purchases like DoubleClick and AdMob.
Google's capital deployment and shareholder returns
One of the reasons Google is considering investing is its growing amount of cash, which currently stands at an impressive $110 billion. The company is considering investing that capital in a larger deal to boost its profits. It is known that Google is already making significant investments in the field of artificial intelligence. Despite this, Google has generated fewer profits for its shareholders in recent months compared to other technology companies such as Microsoft and Meta Platforms.
William Kovacic, an antitrust professor at George Washington University Law School, notes that Google's dominance in online search is causing skepticism among regulators. This dominance casts a shadow over Google's activities, even in areas where Google is not really active, such as customer relationship management (CRM) software. In other words, Google's strong position in Internet search makes regulators cautious, regardless of where Google operates.
The role of mergers and acquisitions in competition
Kovacic points out that mergers and acquisitions can be a way for new or smaller companies to gain a foothold in the market. However, if those deals are blocked, these companies may not have a chance to grow. This, in turn, could lead to decreased competition in the market because there is less competition. According to Kovacic, this is an important aspect to consider when evaluating mergers and acquisitions.