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Google-Fitbit deal advisers look to cash in, if regulators approve

Alphabet Inc. is turning to familiar deal advisers as it looks to expand its hardware portfolio with the $2.25 billion acquisition of Fitbit Inc., a transaction that stands to yield some handsome fees if the deal passes regulatory muster.

The pending purchase of Fitbit, which would be Alphabet's sixth-largest to date, brought back Lazard Ltd. subsidiary Lazard Freres & Co., while Qatalyst Partners LP provided support to Fitbit. Both Lazard and Qatalyst also advised on Google's pending $2.6 billion acquisition of analytics company Looker Data Sciences Inc., where again Lazard advised Alphabet and Qatalyst led the seller.

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Fees on the Looker Data Sciences deal were not disclosed, but Qatalyst collected fees in the $30 million range for advisory work on similarly sized deals. For example, Qatalyst collected about $32.1 million in fees for its work on Cisco Systems Inc.'s $2.29 billion acquisition of Broadsoft. Qatalyst similarly collected $33.0 million in fees for the $2.15 billion deal between Vista Equity Partners and MINDBODY Inc.

Analysts and attorneys called the Fitbit buy a data play for Google, as it would gain access to Fitbit's user data as well as its hardware, though regulatory scrutiny could lead to concessions over how that data is used.

Lazard also advised Alphabet on the $3.20 billion acquisition of an 88% stake in smart-home company Nest Labs that Alphabet did not already own in 2014. The fees that Lazard collected on the Nest deal were not disclosed.

Fee information is not often available for Lazard, though it is set to collect $12 million for its work on VMware Inc.'s pending $3.35 billion acquisition of Pivotal Software. Alphabet did not disclose the financial advisory fees associated with its Nest or Fitbit deals.

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The Fitbit deal is subject to some regulatory risk. If it fails to pass antitrust approval or otherwise meets certain antitrust-related restrictions, Alphabet will owe Fitbit a fee of $250.0 million, according to deal filings. If Fitbit terminates the deal under certain circumstances, including the acceptance of a superior offer, it will pay Alphabet a fee of $80.0 million. While the filings do not yet indicate the specific impact of a termination on Lazard and Qatalyst, the bulk of a financial advisory fee is often tied to a deal's closing.

While there is not much market overlap between Fitbit's wearables business and existing Alphabet hardware, the deal could represent a precedent case in European data protection rulings, attorneys recently told S&P Global Market Intelligence. That could present a regulatory-related termination risk, or require Alphabet to keep Fitbit's data separate from its broader Google assets. In the U.S., some lawmakers have raised concerns about the privacy implications of Google's access to millions of users' health and fitness data.

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