A political marriage? Aleph Alpha and Cohere are negotiating a merger

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According to a report by Handelsblatt, the German AI startup Aleph Alpha and the Canadian company Cohere are negotiating a merger. The report states that a new company would be formed with headquarters in Germany and Canada. The potential deal is reportedly actively supported by the federal government, which also intends to become a key customer of the potential new company. Negotiations are said to be in an advanced stage, and a deal could be signed soon.

In particular, the Federal Ministry for Digital and State Modernization (BMDS) is said to have advocated for the deal. “If leading AI companies from Canada and Germany join forces, that would be a very strong signal,” quotes Handelsblatt Digital Minister Karsten Wildberger (CDU). Handelsblatt quotes Digital Minister Karsten Wildberger (CDU).

Leading AI Companies?

Whether both companies are truly leading in the AI field, as Wildberger claims, is likely debatable. Aleph Alpha emerged as a major German AI hope but failed to meet expectations given the overwhelming US competition. The startup has since positioned itself primarily as an AI service provider for public authorities, which cannot simply use US AI for regulatory reasons. At the end of the year, the company also had to cut jobs, around 50 according to Handelsblatt.

Aleph Alpha founder Jonas Andrulis stepped down as CEO last October and no longer holds any positions in the company. Together with the consulting firm Roland Berger, he is currently working on a startup for “collaborative AI of a new kind.”

According to a CNBC report, Cohere can at least report an annual revenue of around 240 million US dollars last year. The company focuses on AI offerings for the enterprise segment, has formed partnerships with Oracle, Salesforce, SAP, and Nvidia, among others, and positions itself as “capital-efficient.” In other words, it aims to expand computing resources proportionally to customer demand rather than participating in the “speculative excesses” of the broader AI market. However, compared to major players like Anthropic and OpenAI, Cohere has a significantly smaller market position.

“That's why we need strong players”

According to Handelsblatt, Wildberger nevertheless sees a merger as an important political step. Germany and Canada already cooperate closely on digitalization and artificial intelligence. “Because AI is not just about powerful models, application, and scaling, but also about central questions of sovereignty – for Germany and Europe,” Wildberger reportedly said. “That's why we need strong players who bring together top-tier research, innovative products, and sovereign infrastructure.” The deal is in Germany's strategic interest and of utmost importance, Handelsblatt quotes government circles.

To ensure sovereignty, the federal government is said to have pushed for development services to also be carried out in Germany. Furthermore, the merged company must also be sovereign, for example, in terms of infrastructure. According to political will, it should operate in data centers and cloud environments that are managed under European legal jurisdiction and do not allow access by third countries.

Schwarz Digits as Partner

According to the report, Schwarz Digits, the digital subsidiary of the Schwarz Group, which is behind the discounters Lidl and Kaufland, offers infrastructure according to European legal standards. The Schwarz Group is already among Aleph Alpha's investors, sits on the supervisory board, and only recently bought Bosch's shares in the startup in January to secure more influence.

Negotiations between the companies have reportedly been ongoing since the beginning of the year. However, neither Aleph Alpha nor Cohere wished to confirm the negotiations.

(axk)