Google parent Alphabet is in advanced talks to acquire cybersecurity start-up Wiz for roughly $23 billion, a person familiar with the matter said on Sunday.
This deal would undoubtedly bring Israel high tax income, said Racheli Guz-Lavi, a partner in the tax department of Amit, Pollak, Matalon and Co.
The deal, funded mostly in cash and representing the technology giant’s biggest acquisition ever, could come together soon, the source said, speaking on condition of anonymity.
Wiz, founded in Israel and now headquartered in New York, is one of the fastest-growing software start-ups globally, providing cloud-based cybersecurity solutions with real-time threat detection and responses powered by artificial intelligence.
Wiz generated about $350 million in revenue in 2023 and works with 40% of Fortune 100 companies, according to its website. It recently raised $1 billion in a private funding round that valued the company at $12 billion.
Israeli tax revenue from the deal would be paid by Wiz’s founders and investors who are residents of Israel, explained Guz-Lavi, saying that this could amount to around 2.5 to 3.5 billion dollars in taxes.
“Based on the assumption that the value [of the deal] is 23 billion dollars and assuming that 50% of the direct and indirect shareholders are Israeli residents, the tax that is expected to be paid in Israel is between 2.5 and 3.5 billion dollars,” she said.
A boost to Israel's economic morale
The potential deal is an important vote of confidence in Israel’s economy, said EFG Wealth Management Israel CEO Joseph Wolf.
He called the deal “a strong confirmation of two important topics, both of which have been scrutinized since the war began on October 7.”
The resilience of the local economy to the war is the first of these, said Wolf, adding that the second is international investment in Israel.
“There is no doubt that investment in Israel has been lower since the judicial reform and then the war of 2023,” he said, adding that “the deal flow globally and in Israel has begun to firm up in 2024 and much of this is sector-related.”“Wiz finds itself in the right sector at the right time, and it’s evident that, regardless of whether this specific deal goes through, interest in Israeli technology remains robust for strong companies in opportune sectors,” he concluded.
Ian Rostowsky, partner and co-head of Amit, Pollak, Matalon and Co.’s hi-tech and venture capital department, agreed that the deal could be a big vote of confidence in Israel’s hi-tech sector, but added that the possible transaction highlights what could be seen as “over-reliance of the industry on the cyber/security technology sector for significant exits in 2023 and 2024 to date.”
"A large percentage of the [mergers and acquisitions] transactions since October 2023havebeen in cyber security: including Talon Cyber Security (acquired for $625 million), Dig Security (acquired for $350 million), Avalor (acquired for $350 million) and Gem (acquired for $350 million). Flow Security and Spera Security were acquired for $200 million and $130 million respectively," he expanded.