Tech

Microsoft and Amazon took a look at Looker before Google's $2.6 billion purchase

Key Points
  • Prior to selling to Google for $2.6 billion, Amazon and Microsoft were among companies that took interest in Looker.
  • Looker hired Frank Quattrone's Qatalyst Partners for M&A advice.
  • Google and Looker have over 350 shared customers, including BuzzFeed and Hearst.
Tony Avelar | Bloomberg | Getty Images

After Google cloud chief Thomas Kurian approached data analytics company Looker about a potential tie-up earlier this year, Looker turned to a familiar face in Silicon Valley for advice: Frank Quattrone.

Quattrone's investment bank, Qatalyst Partners, shopped around for potential bidders and got interest from companies including Microsoft and Amazon, according to people familiar with the matter. Google aggressively pursued Looker, quickly pulling together its $2.6 billion offer, said the people, who asked not to be named because the negotiations were private.

Kurian, who previously led a 35,000-person team at Oracle, has talked publicly about rapidly hiring enterprise salespeople to take on the cloud leaders. This is his first signature move since taking over as the head of Google's cloud in November. The purchase of Looker is the third-largest in Google's 21-year history, behind only Motorola and Nest, and by far the biggest for the cloud business, which was most recently led by VMware co-founder Diane Greene.

Companies turn to Looker 's business intelligence software for understanding and visualizing large amounts of complex data for everything from marketing to financial planning.

Google paid a hefty multiple to close the deal. According to a report from Canaccord Genuity, Looker will generate $140 million to $180 million in revenue this year. At the high end, that comes out to a forward price-to-sales multiple of 14, which is comparable to the most expensive software deals of last year, like SAP's purchase of Qualtrics and Salesforce's acquisition of MuleSoft.

In its last fundraising round in December, Looker had 600 employees and was valued at $1.6 billion.

Investors have been waiting for Google to get into the dealmaking game, given the huge advantage that Amazon Web Services has built and the amount of money Microsoft is investing to keep hold of second place. Google had 7.6% of the cloud market at the end of 2018, trailing AWS at 32% and Microsoft at 13.7%, according to Canalys.

"An acquisition was a matter of when, not if," Raymond James analyst Aaron Kessler said in a report after Thursday's announcement. "With Looker out of the way, the question turns to 'What else is on GCP's shopping list?'"

Kurian started conversations with Looker in the first few months of the year to get a better understanding of the technology and how customers are using it. Those discussions soon turned into M&A talks and led Looker to hire Qatalyst to suss out market interest, people familiar with the matter said. There was some serious interest among potential suitors but nothing rivaling Google's bid, they said.

Thomas Kurian
David Paul Morris | Bloomberg | Getty Images

Kurian told CNBC on Thursday that the Alphabet board approved the deal and that it's very much a sign of the company's plan to grow in the enterprise. He said that even though Google is paying a 63% premium to Looker's valuation from six months ago, he wouldn't have done the deal if he didn't see it as accretive to Google.

Google and Looker were very familiar with each other well before the deal. The companies have 350 joint customers, including BuzzFeed, Hearst and WPP Essence, according to a blog post. The Google Cloud Platform offers multiple products that cater to Looker's technology, and Google's late-stage investment arm, CapitalG, led an $81.5 million financing round in the company in 2017.

Google and Quattrone also go way back. The company hired Qatalyst in 2008 for advisory work as Microsoft was trying to buy Yahoo, and Qatalyst represented Motorola on its sale to Google in 2011. When Quattrone, who previously had a storied and controversial investment banking career on Wall Street, started Qatalyst in 2008, Google's then-CEO Eric Schmidt called the launch "an important development for the technology industry."

A Google spokesperson declined to comment as did a spokesperson from Microsoft. An AWS representative didn't respond to a request for comment.

— CNBC's Jordan Novet and Jon Fortt contributed to this report.

Correction: Thomas Kurian is the head of Google's cloud business. An earlier version of this post misstated his title.

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Google buys data analytics platform Looker in $2.6 billion deal