The company formerly known as Google — before it rebranded its “collection of companies” to Alphabet, in 2015, turning the main ad revenue business into a corporate unit wholly-owned by the parent entity — looks to have finally completed this process of business reorganization by forming a new holding company, called XXVI Holdings Inc.

Bloomberg reported the move on Friday, picking it up via an FCC filing.

The company confirmed the move in a statement, telling us: “We’re updating our corporate structure to implement the changes we announced with the creation of Alphabet in 2015. This includes a conversion from Google Inc. to Google LLC and the creation of a new intermediate holding company under Alphabet, XXVI Holdings Inc.”

The creation of the new holding company — which is named, in typical Googley fashion, for the number of letters in the alphabet (displayed in Roman Numerals) — finally enables Alphabet to legally separate Google from divisions that were still technically subsidiaries, such as the self-driving unit it spun out in 2016 (as Waymo — which is currently embroiled in a legal fight with Uber), or its AI division DeepMind, which was acquired by Google in 2014.

The new holding company will own equity in each Alphabet company, enabling the shifting of the so-called “other bets” subsidiaries, which had technically still been held by Google to Alphabet — putting them all on the same legal footing as Google, according to Bloomberg.

Google is also switching status from a corporation to a limited liability company (LLC) — to reflect the new structure which sandboxes each business unit as a separate legal silo under the Alphabet parent.

In the FCC filing, the company states: “As a result of the corporate reorganization, Alphabet and Google will be able to operate in a more efficient, economical, and transparent manner, allowing the companies to concentrate on their revenue generating activities.”

While Alphabet claims the corporate reorganization will result in greater transparency regarding the operation of itself and Google, it does not necessarily follow that this is the case with Google’s operations. As Bloomberg notes, the new structure puts a wrapper around Alphabet’s revenue-generating engine (Google) which now has only one investor (Alphabet) and no obligations to publicly disclose financial performance — vs the prior situation when, as a public corporation Google was expected to make disclosures on financial performance to its investors.

Although Alphabet’s spokeswoman also described the reorganization as a legal formality, and claimed it will not affect ultimate shareholder control, operations, management or personnel.

While the timing is unlikely to be related to recent events, given the Alphabet reconfiguration had already been underway for several years, and would clearly require time for lawyers to work through huge complexities (e.g. tax implications), it’s notable that regulatory pressure has been hotting up for Google — which, in June, was found to have violated European competition law, and handed a $2.7BN fine.

The European Commission has two further ongoing antitrust investigations, and has suggested it’s looking into complaints pertaining to other areas of Google’s business processes too.

Another recent regulatory judgement that has impacted one of Alphabet’s divisions pertains to its AI unit, DeepMind, when, in July — when it was presumably still technically a legal subsidiary of Google — the UK’s data protection watchdog ruled that a data-sharing agreement the company had inked with a London National Health Service Trust had breached UK privacy laws by sharing 1.6M patients’ medical records without their consent.

Criticism about a lack of robust legal safeguards in the original DeepMind-NHS data-sharing arrangement, which gave it access to millions of patients’ identifiable medical records, have been sharpened by the fact that ad giant Google is the parent entity of the division that’s being handed sensitive medical data for processing. Thus a legal separation of DeepMind from the Google ad business could help defuse some of the concerns around similar data-sharing arrangements DeepMind — via its internal ‘Health‘ division — seeks to ink in future.

Featured Image: Marcio Jose Sanchez/AP



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