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Alphabet Inc's Google said on Tuesday it would acquire cybersecurity firm Mandiant Inc in a deal valued at about $5.4 billion, as demand for its cloud business skyrockets. This would be its second-biggest deal ever.

Microsoft pulled out of talks more than a week ago, reports say. The discussions with Google, first reported by the Information website, sent shares of Mandiant up 16% at the close of trading Monday.

Google and Microsoft were both looking to bolster their cybersecurity operations -- an increasingly vital part of the companies’ cloud-computing businesses. With Mandiant, Google gets more tools to protect clients and respond to online threats. The business was founded almost two decades ago by Kevin Mandia, a former U.S. Air Force officer, and has gained a reputation for its incident response services.

Microsoft ended its takeover discussions on concerns that Mandiant’s collection of security businesses wasn’t a good enough strategic fit, according to one of the people.

Mandiant’s stock climbed to $22.49 by the close on Monday, marking the biggest one-day gain since Feb. 8, when the Microsoft talks were reported. The shares have advanced 28% this year.

The stock gave up some of those gains in late trading after Bloomberg reported that Microsoft had pulled out of talks, a sign investors were anticipating a bidding war. The shares slipped as much as 6.1%.

Mandiant became a stand-alone company again last year when FireEye Inc. sold its security-product business for $1.2 billion to a consortium led by Symphony Technology Group. FireEye had acquired Mandiant in 2013. Following Monday’s rally, the takeover target has a market valuation of $5.26 billion.

At that level, a deal would dwarf every previous Google transaction -- other than its 2012 acquisition of Motorola Mobility for about $12.5 billion.

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