Why WindSurf Joined Google & The Valley Doesn't Understand M&A

Hey Everyone,

When word broke that Google acquired WindSurf, the internet did what it does best: jumped to conclusions.

“Google poached the team.”
“OpenAI got blindsided.”
“WindSurf’s founders cashed out and bailed.”

Wrong on all counts.

Here’s what actually happened:

Google paid $2.4 billion for WindSurf. But instead of a traditional acquisition, they used a license-and-release structure. If this deal follows the character.ai route, every WindSurf employee with vested equity, whether they joined Google or not, got a special dividend payout on their vested equity and the ones with unvested equity will get an unvested payment plan. If not that’s a great way for google to hurt its 25 year M&A reputation and its deal flow.

Because Microsoft, OpenAI’s biggest investor, reportedly wanted access to WindSurf’s IP without paying the price tag. OpenAI knew what that meant: Microsoft would extract the tech, repackage it, and compete. So WindSurf walked.

Would WindSurf have preferred OpenAI? Yes. Smaller company. All-equity deal. Potential for 3-10x upside.

Because they’re already under the microscope. Multiple antitrust lawsuits are underway. And if they had acquired more than 51% control, the DOJ would’ve had cause to intervene. Instead, Google skirted that threshold, on paper.

But make no mistake: Google gained de facto control.

Could the DOJ step in? Sure. But doing so would require regulators to push a novel legal interpretation , and risk losing in court. No one's made that move yet. But that could change.

• The employees got paid.

• The tech stayed intact.

• Google avoided a fight.

• And the internet told a story that wasn’t true.