Google To Buy Cybersecurity Firm Mandiant For $5.4 Billion

Google said it has reached an agreement to buy cybersecurity firm Mandiant Inc. MNDT -2.00% for nearly $5.4 billion to support its cloud division with additional cybersecurity offerings at a time when companies are facing a wave of attacks on their systems.

The deal is the second largest in the history of Alphabet Inc. GOOG with a share of 0.64% and entered into due to the fact that the company is facing antitrust lawsuits from the Department of Justice and several states for allegedly anti-competitive practices.

By buying Mandiant, Google is giving a boost to its cloud business, which is growing rapidly but remains smaller than its main competitors. In the most recent quarter, the business’s revenue rose about 45% to $5.54 billion, or about 7% of the company’s total quarterly revenue.

Thomas Kurian, chief executive of Google Cloud, said Google wanted to learn from the Mandiant threat research about how it applies security solutions to its products and that the computing giant intends to keep the Mandiant brand.

Mandiant was a pioneer in the cybersecurity industry, publishing detailed reports of malicious cyber campaigns and identifying the likely government sponsor of the intrusions. US intelligence agencies have come to rely on information provided by Mandiant and other companies that shed light on the motivations and tactics of hackers in Russia, China, Iran and other countries.

Kevin Mandia is Mandiant’s CEO. The company has been a pioneer in the cybersecurity industry by publishing detailed reports on malicious cyber campaigns.

Photo: Drew Angerer/Associated Press

Kevin Mandia, Mandiant’s chief executive, said Google brought him in as a buyer because of a desire to better automate cybersecurity and a need to better protect cloud environments from hackers.

“I don’t see this as selling my child. I look at it as advancing the mission,” said Mr. Mandia.

Mr. Mandia, an Air Force veteran, founded Mandiant in 2004, years before government hacks became regular front-page news. In 2013, Mandiant published a groundbreaking report detailing China’s spy campaign. A few months later, it was acquired by security company FireEye Inc., which spun off the Mandiant business last year.

Corporations often call Mandiant after discovering they have been hacked. This type of activity, from ransomware criminal groups and nation-state hackers, is increasingly based in the cloud. With the deal, Mandiant will gain a broader view of one of the world’s largest cloud environments.

“I would say Google is the most powerful company in the world right now when it comes to security,” said Dave DeWalt, a former chief executive of Mandiant when it was known as FireEye. “The flip side is that this is one of the biggest culture clashes I’ve ever seen in an acquisition.”

Microsoft has estimated the annual revenue of its security business at $15 billion.

Photo: Pietro Recchia/Zuma Press

Now Mr. DeWalt, a cybersecurity investor, likened Mandiant to a defense contractor with close ties to the US government and national security and intelligence officials. “You put it in a company that’s trying to sell products and it becomes an interesting tension,” he said.

The acquisition will also test the extent to which Google can use Mandiant’s consulting services to sell automated cybersecurity tools tailored for the cloud, said Alex Henderson, a cybersecurity analyst at investment bank Needham Group Inc.

“In my opinion, this is not very suitable,” he said.

The deal will put Google in more direct competition with Microsoft Corp., which runs its own security incident response business and, according to analysts, has the most mature strategy of cloud providers as a seller of security products. Microsoft has estimated the annual revenue of its security business at $15 billion.

Mr. Mandia said he does not expect the Google acquisition to result in any business complications that could stifle the threat research on which his company has built its brand. He and Mr. Kurian declined to comment on whether the acquisition would lead to layoffs.

Investing in cybersecurity has been popular with technology companies as they have tried to offer these services to customers. Microsoft also reportedly expressed interest in a takeover of Mandiant last month.

Cyberattacks linked to Russia in the run-up to that country’s invasion of Ukraine have only raised awareness of such threats.

Google agreed to pay $23 in cash for each share of Mandiant outstanding, representing a 2.3% premium over Monday’s closing price of $22.49 for Mandiant.

The price of the deal is almost 53% higher than the Reston, Virginia-based company’s closing price of $15.06 on Feb. 7, before published reports surfaced that Microsoft had beaten Mandiant.

Shares of Mandiant fell about 2.5% in late morning trading on Tuesday to $21.93.

For Google, the deal marks one of its biggest bets yet, only smaller than its $12.5 billion purchase of Motorola Mobility.

The companies said the deal is expected to close later this year. Google has faced scrutiny from regulators for smaller acquisitions. It took more than a year for Google to close its $2.1 billion acquisition of Fitbit LLC as regulators scrutinized the deal.

Google is battling antitrust lawsuits from the Justice Department and several states over conduct related to its flagship search engine and digital advertising business, based on allegations that the company says are deeply flawed.

— Robert Macmillan contributed to this article.

Write to Will Feuer at [email protected], Dustin Foltz at [email protected] and David Uberti at [email protected]