Google LLC’s parent company Alphabet Inc. has reportedly abandoned its plans to acquire the publicly listed marketing software firm HubSpot Inc.

Bloomberg today cited “people familiar with the matter” as saying that negotiations over the deal, which had been ongoing since at least April, have now been called off. HubSpot’s stock fell more than 11% today in the wake of the report.

Bloomberg said “the sides didn’t reach a point of detailed discussions about due diligence,” but its sources didn’t provide any reasons for the breakdown in the talks.

HubSpot is the creator of software that enables companies to automate their marketing operations and reach out to prospective customers. Its flagship product is the cloud-based Marketing Hub software, which can be used by marketers to create advertising campaigns, distribute promotional content such as emails and newsletters and perform other marketing tasks.

In recent months, HubSpot has integrated various artificial intelligence tools into its platform to help marketers automate tasks such as creating new websites and social media content.

For sales teams, HubSpot offers a customer relationship management platform that rivals the likes of Salesforce Inc. and Freshworks Inc. And for customer service departments, HubSpot’s Service Hub helps to manage their day-to-day work.

When news of the potential acquisition first emerged, analysts said Alphabet was looking to buy HubSpot to increase Google’s revenue from its cloud infrastructure and business software, as well as other areas of its business. Google Cloud had long struggled to make a return on investment, with the unit only becoming profitable last year following years of multibillion-dollar investments.

By acquiring HubSpot, Google would also have a way to compete with CRM giants such as Salesforce, Microsoft Corp. and Oracle Corp.

The breakdown of the discussions came as a surprise, as it was thought that the discussions had progressed to the point where the two parties were deliberating the exact terms of the acquisition. Had the deal gone ahead, it would likely have been Alphabet’s – and therefore Google’s – biggest-ever acquisition, dwarfing the $12.5 billion it paid to buy Motorola Mobility in 2011.

One factor that may have played a part in Alphabet’s decision to stop pursuing HubSpot is the regulatory scrutiny that would have inevitably come with any deal. In recent years, regulators in the U.S. and Europe have pushed back on deals involving large-sized technology companies over fears that they’re trying to establish monopolies in the industries they compete in.

Amazon.com Inc. reportedly called off its plans to buy the robot vacuum cleaner maker iRobot Corp. for $1.7 billion as a result of regulatory pressure, and although Microsoft did ultimately manage to push through its $68.7 billion acquisition of the video game publisher Activision Blizzard, it took more than 20 months to convince regulators that it should be allowed to do so.

Other blockbuster deals called off as a result of regulatory scrutiny in recent years include Nvidia Corp.’s proposed $66 billion buyout of the British chip designer Arm Ltd. and Adobe Inc.’s mooted $20 billion acquisition of the design software firm Figma Inc.

So it may well be that Google just didn’t want any more headaches. Google is, after all, already embroiled in various regulatory struggles around the world. For instance, the U.S. Justice Department and a number of state attorneys general have accused the company of violating anti-monopoly laws through its exclusivity deals with smartphone makers and browser companies, to ensure its search engine is the default in their products.

Constellation Research Inc. analyst Liz Miller said it seems that the deal probably fell apart after the first few conversations. She pointed out that HubSpot is thoroughly dedicated to its customers, and that it likely saw little benefit for them in being acquired by Google. “Throughout this whole fanciful acquisition daydream, I have struggled to see any upside for HubSpot’s user base,” she said.

She added that Google probably realized it would struggle to win over HubSpot’s customers too, and was likely concerned over the regulatory scrutiny the deal would have inevitably attracted. “The regulatory bodies were almost certainly never going to allow this union to pass,” Miller said. “But the rumors have certainly gotten some nice attention for HubSpot and the potential that the company’s platform has.”

HubSpot has been led by the former Dropbox Inc. and Workday Inc. executive Yamini Rangan since 2021, and during that time it has displayed some impressive growth – much faster than Alphabet. In the last six quarters, the marketing software firm has grown its revenue by more than 20%, and prior to that it was regularly showing annual growth of 30% or more. In its most recent earnings call in March, it reported that its sales had jumped 23% from a year earlier, to $617.4 million.

That said, it hasn’t always been plain sailing for HubSpot, with the company notably laying off around 500 people, about 7% of its workforce, in January 2023. At the time, Rangan admitted that the company had “overhired” during the COVID-19 pandemic era. Moreover, in HubSpot’s latest earnings call, Rangan warned investors that the company is facing a more challenging business climate, where customers are insisting on seeing “more proof of concepts” before committing to purchases.

Still, HubSpot has been growing much better than Alphabet, which hasn’t managed to deliver revenue growth of 20% or more since early 2022. In its last earnings call, it reported revenue growth of just 15%.

HubSpot, which launched in 2006 and went public in 2014, had a market capitalization of more than $32 billion when news of the acquisition talks first emerged in April. Had a deal been agreed, it’s likely that the value would have exceeded that figure. Following today’s news, HubSpot’s market cap has declined to just over $25 billion.

Photo: HubSpot