Google's Wiz acquisition, M&A activity overall, seems more likely under new FTC leadership: Wedbush

Google's (NASDAQ:GOOG)(NASDAQ:GOOGL) proposed acquisition of cybersecurity startup Wiz appears more likely than its last attempt due to changes at the U.S. Federal Trade Commission, according to Wedbush.

It could also signal a new wave of merger and acquisition activity across the tech sector.

"Wiz has become a household name for CIOs as the Israeli cyber security player has a strong cloud cyber security platform and customer base that is going after a $1 trillion market opportunity along with Palo Alto Networks (PANW), Crowdstrike (CRWD), CyberArk (CYBR), Cloudflare (NET), Snyk, Checkpoint (CHKP), Okta (OKTA), Tenable (TENB), and others," said Wedbush analysts, led by Daniel Ives, in a Tuesday investor note.

The tech giant has signed a definitive agreement to buy Wiz for $32B, which would be Google's largest acquisition ever.

"In our view with Lina Khan gone at the FTC...the M&A engines are back underway in Big Tech after a dark period for tech M&A," Ives added.

The deal comes after Alphabet was reportedly close to a deal to purchase Wiz last summer for about $23B. The talks were scuttled amid concern the deal could take a long time to gain regulatory approval.

"For Google this would be a shot across the bow at other big tech stalwarts, especially Microsoft (MSFT) and Amazon (AMZN), making a major bet on the cyber security space to complement its cloud offering giving GOOG an edge on a number of cloud deployments and further monetizing the cyber security cloud space," Ives said. "After falling behind Microsoft in the cloud arms race we have seen major traction from Google over the past year under Kurian around cloud success along with its core AI strategy."

"With an arms race on the cloud and AI fully underway, Big Tech stalwarts will continue to be aggressive on M&A and not shy away due to regulatory worries in our view following the Microsoft/Activision blueprint and victory along with Khan gone," Ives added.

It could lead to more M&A activity in the cybersecurity space, specifically.

"With two major cloud security vendors (Lacework and now Wiz) taken out, we see potential for further consolidation in a still fragmented market," said Oppenheimer analysts Ittai Kidron and George Iwanyc, in an investor note. "The cloud security market has several startups competing for share (Sysdig, Orca, Aqua, etc.), which could be targets for consolidation."